FEDERAL UPDATES TO RETIREMENT PLANS IN 2023: WHAT YOU NEED TO KNOW ABOUT SECURE 2.0

The federal spending bill signed by President Biden on December 29, 2022 includes some important changes for retirement plans. Referred to as Secure 2.0, this:

• Increases again the age at which employees are required to start making plan withdrawals, to age 73 as of 1/1/23 and 75 as of 1/1/33.

• Enacts an automatic deferral provision, requiring employees to enroll at no less than 3% or more than 10%, so employees have to actively opt out of deferring.

• Allows employees to withdraw up to $1,000 for emergency expenses without the normal 10% early withdrawal penalty. Employers could also allow employees to defer to an emergency savings account up to $2,500.

• Increases catch up contribution limit to $10,000 starting in 2025 for savers 60 to 63.

EXPERT REACTION

“These changes will enhance retirement planning for employees, with little to no impact on their employers. Automatic deferrals have shown to be successful in increasing employee participation in their 401(k) plans, so the requirement for all plans to have this will expand that participation further.

Sandra Dickerson, CEO/HR Director, Your PeopleProfessionals & 22/23 Santa Maria Valley Chamber Executive Board Committee Chairwoman