Lawmakers have successfully attached SECURE 2.0 retirement provisions to the 4,000-page 2023 omnibus legislation that Congress must pass by Friday at midnight to avoid a government shutdown.
The SECURE Act 2.0 (a follow-up to the Setting Every Community Up for Retirement Enhancement Act) is designed to make it easier for individuals to save enough for a dignified retirement. Provisions include a 100% tax credit for small businesses that create retirement plans; an incremental increase to age 75 in the required minimum distribution (RMD) age for retirees; and a significant 50% increase that retirement plan participants are allowed in their catch-up contributions, up to $10,000 annually beginning when participants are age 60.
The package also introduces a starter 401(k) that could provide more than 19 million new American workers with access to the workplace-based retirement system through a brand new super-simple safe harbor 401(k) plan, the House and Senate Appropriations Committee said in the legislation.
“Including Secure 2.0 retirement provisions in the last major legislation of the year means that Congress is poised to help millions more workers and retirees with significant improvements to the nation’s private retirement system,” said Paul Richman, chief government and political affairs officer for the Insured Retirement Institute (IRI) in a statement. IRI is a trade group that represents the interests of providers and marketers of 90% of annuities in the U.S.
“We are reviewing the approximately 100 retirement provisions in the measure with our members to understand the full implications,” Richman said.
To incentivize the creation of retirement plans at small businesses, the bill will dramatically increase the 50% tax credit covering startup and administrative costs to 100% annually for smaller employers with up to 100 employees.
Smaller employers are also entitled to an additional credit—generally a percentage of the amount contributed by the employer to the plans on behalf of employees, up to a cap of $1,000 per employee.
The package also requires plans to include aggressive auto-enrollment and auto-escalation provisions beginning in December, 2024 to encourage more employees to participate in their workplace 401(k) and 403(b) plans, unless the workers opt out.
The initial automatic enrollment amount minimum is at least 3%, but not more than 10%, and is increased every year by 1% until it hits the 10% mark.
“Providing for people to participate in the plan, unless they take the initiative to opt out, significantly increases participation,” the Senate Appropriations Committee said in the legislation.