By Joel Krooks, Esq.

On December 29, 2022, President Biden signed SECURE 2.0 Act into law. SECURE 2.0 builds on the SECURE Act that was enacted in 2019 and continues to change retirement plans for individuals.

Increase in the Age for Required Minimum Distributions:

SECURE 2.0 increases the age individuals begin taking required minimum distributions from age 72 to 73 in 2023. In 2033 the required minimum distribution age increases to 75. In addition, the penalty for failing to take a required minimum distribution is reduced from fifty percent (50%) to twenty-five (25%). If the plan participant corrects the failure to take the distribution in a timely manner, the penalty may be reduced further to ten percent (10%).

Eliminating Required Minimum Distributions from Roth Accounts in 401(k) and 403(b) plans

Starting January 1, 2024, individuals that have Roth 401(k) and 403(b) accounts are no longer required to take required minimum distributions. However, if an individual receives Medicaid benefits, they are still required to take required minimum distributions from these Roth accounts.

Catch-Up Contributions

Individuals 50 and older are permitted to make an additional catch-up contribution. In 2023, the catch-up amount for retirement plan participants over 50 is $7,500. Starting in 2025, individuals who are between the ages of 60 to 63 are permitted to make a larger catch-up contribution. This larger amount will be the greater of $10,000 or 150% of the catch-up limit for that year.

529 Rollover to Roth IRA

Beginning in 2024, individuals with a Section 529 plan can move money from the 529 account to a Roth IRA for the benefit of the beneficiary. For example, if a 529 plan account was funded for a child, but the child did not use all of the account for education expenses and there is money left over, you can now transfer funds from that 529 account to a Roth IRA for the child. However, the maximum amount that can be transferred is $35,000 during an individual’s lifetime, the annual limit for how much can be moved from a 529 plan to a Roth IRA is the IRA contribution limit for the year ($7,500 for individual over 50 in 2023), any contribution to the 529 plan within he last five years are ineligible to be moved and the 529 plan must have been maintained for 15 years or longer. There are a lot of limits to this rule, but this may help families that have not used all of the funds in a 529 account.

Naming a Supplemental Needs Trust as a beneficiary of a Retirement Account

SECURE 2.0 corrected language to allow a charitable organization to be named as a remainder beneficiary of a supplemental needs trust that is established for a person with a disability or is chronically ill.

These are just a few of the many changes that SECURE 2.0 created. It is important to discuss with your financial advisor how these changes affect you. We at Littman Krooks LLP can help you navigate the changes of SECURE 2.0 and determine how you may be impacted.