Jim Probasco has 30+ years of experience writing for online, print, radio, and television media, including PBS. His expertise includes government programs and policy, retirement planning, insurance, family finance, home ownership and loans. He has a bachelor's from Ohio University and Master's from Wright State University in music education.
Updated October 20, 2023 Fact checked by Fact checked by Ryan EichlerRyan Eichler holds a B.S.B.A with a concentration in Finance from Boston University. He has held positions in, and has deep experience with, expense auditing, personal finance, real estate, as well as fact checking & editing.
The SECURE 2.0 Act of 2022 is a law designed to substantially improve retirement savings options—including 401(k)s and 403(b)s—in the U.S. It builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. SECURE 2.0 was signed into law by President Joseph R. Biden on Dec. 29, 2022, as part of the Consolidated Appropriations Act (CAA) of 2023.
The SECURE 2.0 Act began as two pieces of legislation, one from the House of Representatives (H.R. 2954) and one from the U.S. Senate (S. 1770). After both branches of Congress passed their respective bills, the consolidated legislation was included in the CAA omnibus budget bill as Division T (SECURE 2.0 Act of 2022).
SECURE 2.0 was something both chambers of Congress wanted to see become law; bipartisan support was woven into both versions of the bill. The 103 sponsors of H.R. 2954 consisted of 55 Democrats and 48 Republicans. On the Senate side, six Republicans and five Democrats were co-sponsors of S. 1770.
The SECURE 2.0 Act attempts to accomplish three goals: Get people to save more for retirement, improve retirement rules, and lower the employer cost of setting up a retirement plan. Some provisions are in effect (as of Jan. 1, 2023), while others will go into effect in 2024, 2025, and even later. In pursuit of those goals, the new statute is packed with 92 retirement-savings provisions, including the following:
Beginning in 2025, SECURE 2.0, Section 101 requires employers to automatically enroll eligible employees in new 401(k) or 403(b) plans with a participation amount of at least 3% but no more than 10%. The contribution escalates at the rate of 1% per year up to a minimum of 10% and a maximum of 15%.
Existing 401(k) plans are not required to auto-enroll employees—just new plans.
Employers can encourage participation with small financial incentives. Employees can opt out of the plan if they wish. Small businesses (with 10 or fewer employees), new businesses (fewer than three years old), church plans, and government plans are exempted from the provision.
Under previous law, retirees had to begin taking required minimum distributions (RMDs) at age 72. SECURE 2.0, Section 107, increases the required minimum distribution age to 73, beginning on Jan. 1, 2023, and to 75, beginning in 2033. Specifically, the RMD age increased to 73 for individuals who turned 72 after Dec. 31, 2022, or who will turn 72 before Jan. 1, 2033. It will increase to 75 for individuals turning 74 after Dec. 31, 2032.
Section 302 reduces the excise tax—the penalty you pay—on failure to take an RMD from 50% to 25%. If the failure to take a required minimum distribution is corrected in a timely manner (as defined under SECURE 2.0), the excise tax on the failure is further reduced from 25% to 10%. The provision is effective for taxable years beginning after Dec. 31, 2022.
Section 325 eliminates the pre-death RMD for the owner of a Roth-designated account in an employer 401(k) or other retirement plan. Under current law, required minimum distributions are not required to begin prior to the death of the owner of a Roth IRA, although pre-death distributions are required in the case of the owner of a Roth-designated account in an employer retirement plan. This provision takes effect for taxable years beginning after Dec. 31, 2023.
Section 108 indexes the $1,000 catch-up contribution for savers age 50 and above to the IRS cost-of-living-adjustment (COLA). This provision is effective for taxable years beginning after Dec. 31, 2023.
Section 109 of SECURE 2.0 substantially increases catch-up limits for 401(k), 403(b), and 457 plan participants aged 60 to 63 to the greater of $10,000 or 150% of the “standard” catch-up amount for that year, beginning after Dec. 31, 2024. For SIMPLE plans, the limit increases from $3,500 to $5,000, also indexed to inflation.
Section 117 increases the annual deferral limit and the catch-up contribution at age 50 for SIMPLE IRA or 401(k) plans by 10% for employers with 25 or fewer employees. Employers with 26 to 100 employees are allowed to provide higher deferral limits if the employer provides a 4% matching contribution or a 3% employer contribution.
Under Section 603 of SECURE 2.0, catch-up contributions by employees who make more than $145,000 per year (indexed to inflation) must be made with after-tax dollars (the Roth tax treatment). This provision becomes effective after Dec. 31, 2023.
SECURE 2.0 expands access to retirement savings in several ways:
Section 202 increases the amount individuals can move to a qualified longevity annuity contract (QLAC) from $125,000 to $200,000. It also adjusts the $200,000 limit annually for inflation and eliminates the rule capping QLAC premiums at 25% of the participant's total plan assets. Some provisions of section 202 apply to QLACs purchased or received on or after July 2, 2014, while others are effective as of the date the legislation became law.
That depends on the specific provision. Some take effect immediately, others begin in 2023, 2024, or even later. For example, automatic retirement plan enrollment doesn't start until 2025, while the increase in age for RMDs from 72 to 73 began Jan. 1, 2023.
Until passage of the Act you had to begin taking RMDs at age 72. SECURE 2.0, Section 107, increased the required minimum distribution age to 73 as of Jan. 1, 2023, and to 75 beginning in 2033.
SECURE 2.0 does not address Social Security issues. One of the downsides of the SECURE Act 2.0 is the fact that it does nothing to solve the problem of the Social Security Trust Fund, which is expected to run out of money in just over a decade.
Though cooperation between Republicans and Democrats in Congress remains at an all-time low, the SECURE 2.0 Act stands out as one of the few pieces of legislation in which both sides could, and did, find common ground.
As comprehensive as SECURE 2.0 Act of 2022 is, the law does not address Social Security shortfalls. That said, its provisions provide a number of routes to improvement in the growth of the percentage of Americans with a retirement savings plan.