SECURE 2.0 Act provisions needing regulatory guidance

Following is information about key SECURE 2.0 Act provisions and specific regulatory guidance that is needed.

Provision

Guidance

Increase in required minimum distribution (RMD) age to 75

Effective 2023 and 2033

Guidance needed:
Clarification of when individuals born in 1959 are subject to beginning RMDs, at age 73 or age 75.

Guidance received to date:
None, but not in effect until 2033.

Note the change in RMD age to 73 was effective for plan years after 12/31/22 and there is no ambiguity on this portion of the law.

Roth amounts excluded from RMD

Effective 2024

Guidance needed:

  • Confirmation that the exclusion includes individuals who are already in RMD payout status.
  • Application of the new exclusion to beneficiaries in the year of a participant’s death.

Guidance received to date: None

Catch-up contributions required to be made as Roth for individuals with wages exceeding $145,000 in prior year

Effective 2024

Guidance needed:

  • Clarify definition of wages, particularly for partners in partnerships who appear to be exempt from the $145,000 wage guideline under current law.
  • Correction procedure to address additional wages that could change a participant’s catch-up from non-Roth to Roth required.
  • Clarification that plans still have design flexibility, i.e., plan doesn’t allow for catch-up contributions at all, or plan allows catch-ups but only on a Roth basis for all employees regardless of compensation, etc.

Guidance received to date: None

Note technical correction needed:
The SECURE 2.0 Act erroneously eliminated all age-based catch-up contributions to 401(k) plans. Congress needs to correct this technical error so that all catch-up contributions may continue in 2024 and beyond.

Current status:

  • Congressional letter from the House Ways & Means and Senate Finance committees to heads of the Treasury and IRS on May 23, 2023, stated that Congress did not intend to eliminate catch-up contributions and that Congress intends to pass technical corrections legislation to address the incorrect reference in the SECURE 2.0 Act.
  • Technical corrections legislation has not yet been introduced or passed.
  • Possible additional guidance from the IRS and Treasury.

Provision

Guidance

Student loan matching contributions

Effective 2024

Guidance needed:

  • Clarification of “eligible loans” and whether loans incurred by a parent to pay for a child’s qualified education expenses are eligible for student loan matching.
  • Clarification as to whether cosigner of a qualified education loan is considered to have “incurred” the debt and would be eligible for the matching contribution.
  • Various administrative clarifications needed on window for participants to claim they are eligible for a match, timing on matching for safe harbor contributions, timing on separate ADP testing of employees who receive a student loan match.
  • Ability of safe harbor plans to impose last-day-of-the-plan-year requirement for student loan matching contributions.
  • Employer’s ability to collect information from participants to enable tracking of student loan repayments through the year as a means for participants to annually certify their payments.

Guidance received to date: None

Emergency personal expense distributions

Effective 2024

Guidance needed:
Clarification of when a distribution is considered fully repaid. Can any rollover or transfer into the plan that exceeds the amount of the distribution be considered a full repayment?

Guidance received to date: None

Pension linked emergency savings accounts (PLESA)

Effective 2024

Guidance needed:

  • Clarification on information reporting.
  • Timing of the identification of highly compensated employees (HCEs) for exclusion from PLESA (based on prior year vs. current year).
  • $2,500 limit: Does the limit exclude earnings?
  • Clarification of the permissibility of indirect rollovers of PLESA money upon termination of employment or termination of the PLESA.
  • Cash out limits: Is PLESA money considered when determining present value of participant’s accrued benefit?

Guidance received to date: None

Roth designated employer contributions

Effective upon enactment

Guidance needed:

  • Reporting and taxation: On W2 as contributions are regularly reported, or on 1099-R?
  • Taxable in the year they are made even if they are contributions for a prior year?
  • Flexibility in plan design as to when participants can make and change elections to treat employer contributions as Roth designated?
  • Vesting: Do employer contributions that are designated Roth become immediately vested even if a participant has not met the vesting schedule?
  • Can plans restrict Roth designation of employer contributions only to participants who are fully vested?

Guidance received to date: None

Penalty-free distribution to terminally ill participants

Effective upon enactment

Guidance needed:

  • Clarify whether this is a new in-service distribution or only if the participant is otherwise eligible for distribution due to attainment of age 59½, they are disabled, or separated from service.
  • Clarify need for employee to furnish evidence of terminal illness.

Guidance received to date: None

Eligible distributions to victims of domestic abuse

Effective 2024

Guidance needed:

  • Can distributions be taken more than once a year as long as they do not exceed the overall limitation?
  • Limited to the lesser of $10,000 or 50% of participant’s non-forfeitable benefit: Clarify when the 50% is determined, when distribution is requested or when it is made, or either.

Guidance received to date: None