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Tax Planning

January 03, 2023

SECURE Act 2.0: Top Ten Highlights

On December 29, 2022, President Biden signed into law the omnibus spending bill. A key aspect of this Consolidated Appropriations Act, 2023, is funding of the federal government. But with a total of $1.7 trillion of spending, there is much more included in this law, which spans 4,126 pages.

Here we explore one component — the SECURE Act 2.0, with its significant and taxpayer-friendly changes to retirement plans, and provide an overview of the top 10 highlights, some of which will take effect in 2023 and others in later years.

1. Required minimum distributions (RMDs)

The SECURE Act 2.0 delays the triggering age for RMDs, that is, the year in which one is required to begin taking minimum distributions from a tax-advantaged retirement savings account. Starting January 1, 2023, the mandatory age to begin making withdrawals jumps from 72 to 73. In 2033, the age to begin taking RMDs will be 75.

Roth accounts in employer retirement plans will be exempt from the RMD requirements starting in 2024. Also, beginning immediately, in-plan annuity payments that exceed a participant’s RMD amount can be applied to the following year’s RMD.

Two important notes:

  • If you turned 72 in 2022 or earlier, you should continue taking RMDs as scheduled.
  • If you’re turning 72 in 2023 and have already scheduled your withdrawal, you may want to discuss with your advisors whether to reconsider.

Starting in 2023, the penalty for failing to take an RMD will decrease from 50% to 25% of the RMD amount not taken. The penalty will be further reduced to 10% for IRA owners if the account owner withdraws the RMD amount previously not taken and submits a corrected tax return in a timely manner.

Planning consideration: Consider when to take your first RMD, as the law permits you to defer the first payment until April 1st of the second year. For example, if you turn 73 in 2024, you can take your first RMD either by December 31, 2024, or delay until no later than April 1, 2025. But, if you delay your first RMD to April 1, 2025, you will pay tax on two RMD distributions in 2025 — your first by April 1, 2025, to satisfy the 2024 required withdrawal, and the second by December 31, 2025, to satisfy the 2025 required withdrawal. This stacking of income in 2025 could have an adverse impact on your tax bracket and other tax attributes.

2. Qualified charitable distributions (QCDs)

Under existing law, an IRA owner age 70½ or older does not have to pay tax on up to $100,000 of QCDs per year. These can be made with voluntary withdrawals as well as with RMDs. To qualify, the QCD must be paid directly to a qualified charity (accomplished by having the distribution check made payable to it). Donor advised funds, supporting organizations and private foundations are not qualified charities.

Beginning in 2023, people age 70½ and older may elect as part of their QCD limit a one-time gift up to $50,000, adjusted annually for inflation, to a charitable remainder unitrust, a charitable remainder annuity trust or a charitable gift annuity. This amount counts toward the annual RMD, if applicable. Similarly, these QCDs must be paid directly to the recipient vehicle.

3. Student loan 401(k) matching

Starting in 2024, employers will be able to “match” employee-qualified student loan payments with matching payments to a retirement account. Qualifying payments are those made to a qualified education loan that was incurred by the employee to pay qualified higher education expenses, as defined in the Higher Education Act of 1975. Employers are permitted to rely on a certification by employees that the debt qualifies.

4. Automatic enrollment and portability

Starting in 2025, employers establishing a new 401(k) or 403(b) retirement savings plan must have default automatic enrollment for all employees (subject to their eligibility). The initial contribution must be at least 3% but not more than 10% of pretax earnings. Plans also are to provide for an automatic annual increase after the first year of participation of 1% per year until at least 10% of the employee’s compensation, but not exceeding 15%.

Employees may opt out of making contributions or elect to have contributions made at a different percentage. Small businesses with 10 or fewer employees as well as businesses started less than three years ago would be exempt. The Act permits retirement plan service providers to offer plan sponsors automatic portability services, transferring an employee’s retirement accounts to a new plan when they change jobs. The change could be especially useful for savers who otherwise might cash out their retirement plans when they leave jobs.

5. Catch-up contributions expanded

IRAs. In 2023, qualifying individuals can contribute $6,500 to a traditional or Roth IRA, indexed for inflation. Anyone 50 or older is entitled to make a $1,000 catch-up contribution. Previously, this $1,000 catch-up was not indexed for inflation, but starting in 2024 it will be (the adjustment will be rounded down to the nearest $100).

401(k) and other employer sponsored plans. The 2023 contribution limit is $22,500, with a catch-up of an additional $7,500 for those 50 and older. Starting in 2025, individuals ages 60-63 will be able to make catch-up contributions up to the greater of $10,000 or 150% of the “standard” catch-up contribution. The $10,000 will be indexed for inflation starting in 2026.

Twist: Beginning in 2024, there will be an income limit that governs the type of account into which a catch-up contribution can be made. Those earning more than $145,000 in the prior calendar year only will be able to make a catch-up contribution to a Roth account in after-tax dollars. Individuals earning $145,000 or less will be exempt from the Roth requirement. Starting in 2025, the $145,000 income limit will be indexed for inflation, but rounded down to the nearest $500.

6. Savings

Beginning in 2024, defined contribution retirement plans are able to add an emergency savings account that is designated Roth-account-eligible to accept participant contributions for non-highly compensated employees. Contributions are limited to $2,500 annually (or lower, as set by the employer), and the first four withdrawals in a year would be tax- and penalty-free. Depending on plan rules (set by the employer), contributions may be eligible for an employer match. In addition to giving participants penalty-free access to funds, an emergency savings fund could encourage plan participants to save for short-term and unexpected expenses. Upon termination of employment, the participant can roll the funds into another Roth. If a participant becomes a highly compensated employee, the account can be retained, but no further contributions made into it. The $2,500 threshold is indexed for inflation beginning in 2025.

7. Withdrawals from a retirement account

Typically, one pays a 10% penalty tax on a withdrawal from a tax-preferred retirement account before age 59½, unless meeting an exemption. The new act adds an exemption effective in 2024 “for purposes of meeting unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses,” allowing withdrawals up to $1,000 penalty-free.

Only one distribution can be made every three years, or one per year if the distribution is repaid within three years. However, if the funds are not repaid within three years, penalties will be applied on withdrawals for another emergency for the same reasons. Penalty-free withdrawals are also allowed for individuals who need the funds in cases of domestic abuse. These are limited to the lesser of $10,000 or 50% of the present value of the vested benefit. Also, penalty-free withdrawals may be made in the case of a participant’s terminal illness.

8. Roth matching permitted

 Under SECURE Act 2.0, beginning in 2025, employers will be able to provide employees the option of receiving vested matching contributions in Roth accounts. Previously, matching in employer-sponsored plans was made on a pretax basis. Contributions to a Roth retirement plan under this match will be after-tax, but earnings still can grow tax-free.

9. 529 plan changes

Starting in 2024, funds in a 529 account that was opened at least 15 years before the date of distribution can be rolled into a Roth IRA account without current income taxation or penalty. These rollovers may be done multiple times but are subject to an aggregate lifetime limit of $35,000. Further, each distribution cannot exceed the aggregate amount contributed (and earnings attributable thereto) before the five-year period ending on the date of the distribution. Also, the rollover is treated as a contribution toward, and thus capped by, the annual Roth IRA contribution limit.

10. Retirement savings lost and found database

The Department of Labor is to establish within two years of the date of enactment of SECURE Act 2.0 a national database that is searchable to serve as a “lost and found” for 401(k) and pension plans. This will permit employers to locate “missing” participants as well as enable participants to more easily pinpoint where their retirement savings are located. Participants can opt out of the database.


As shown in these sample provisions, the SECURE Act 2.0 makes sweeping and taxpayer-friendly changes to retirement accounts. We recommend employers and employees work closely with their tax advisors to best position themselves to navigate this new law. As always, please contact your Glenmede Relationship Manager if you would like to discuss how these changes may impact your or your family’s particular situation.

This material provides information of possible interest to Glenmede’s clients and friends, and does not provide investment, tax, legal or other advice. Any opinions, recommendations, expectations and/or projections expressed herein may change after the date of publication. Information obtained from third-party sources is assumed to be reliable but may not be independently verified, and the accuracy thereof is not guaranteed. Any potential outcome discussed, including but not limited to performance, legislation or tax consequence, ultimately may not occur due to various risks and uncertainties. Clients are encouraged to discuss any matter discussed herein with their tax advisor, attorney or Glenmede Relationship Manager.