SECURE 2.0 Updates
There are several provisions of SECURE 2.0 that don’t require any employer action, and one that will require action starting in 2026. Employers should be aware of how these changes may affect their employees.
Catch-Up Contributions
Certain participants will be able to increase their catch-up contributions and higher earners must make their catch-up contributions on a Roth basis. RPB will notify the affected participants of these changes.
Effective 2025 for participants aged 60 - 63
Higher catch-up amount. Participants between the ages of 60 and 63 will be able to make catch-up contributions up to $10,000 or 50% more than the standard catch-up amount, whichever is greater. (In 2023, the catch-up limit for people ages 50 and older is $7,500.)
Effective 2026 for high earners
High earners must use Roth option for catch-up contributions. Beginning in 2026, participants aged 50 and older who earned more than $145,000 in the prior calendar year (indexed for inflation) will be required to make catch-up contributions on a post-tax Roth basis. While this will increase the immediate tax burden of high earners who are currently making catch-up contributions with pre-tax dollars, qualified Roth withdrawals, including earnings, are free from federal income taxes.
RPB and our recordkeeper, Fidelity, are working to ensure a smooth transition for employers and participants by the effective date. We will update employers on their next steps in the near future.
Keep in mind that RPB’s plan currently allows all participants to make Roth contributions for their standard elective deferrals.
Required Minimum Distributions
Over the next few years, the rules governing required minimum distributions (RMDs) will change. RPB will be notifying participants of these changes.
Effective immediately
Increased starting age. The age at which RMDs are payable has increased from 72 to 73 for participants turning 72 in 2023 or later and will increase to age 75 for participants turning 74 in 2033 or later. This helps participants who are closer to or at retirement keep their money in their tax-advantaged retirement account for longer.
Birth Year Age at Which RMD Begins 1950 or earlier
72 (70 1/2 for those who turned 70 1/2 prior to 2020) 1951 - 1959
73 1960 or later
75
Reduced penalties. The 50% excise tax imposed on recipients for late RMDs is now reduced to 25% and will be further reduced to 10% when a correction is made within a certain timeframe.
Effective January 1, 2024
No RMDs for Roth 403(b) balances. Roth 403(b) balances will no longer be subject to RMDs during a participant’s lifetime. (However, for retirees who reach age 73 in 2023, Roth account RMDs must still be made by April 1, 2024.)
Flexible start date for surviving spouses. The surviving spouse of a plan participant will be able to choose whether to use their own age or their deceased spouse’s age to determine when their RMDs will begin. This may be used to delay the start of RMDs and/or increase the period of time over which the surviving spouse receives payments.
Additional Early Withdrawal Options
Participants will soon have access to penalty-free early withdrawals under certain circumstances. The following provisions are now part of the RPB Plan, but implementation is still in process. We will update employers and participants once they are live.
Typically, participants face a 10% penalty for withdrawing funds from their account before the age of 59.5 if they are still working. Under Secure 2.0, that penalty will be waived if the participant is:
- Diagnosed with a terminal illness (effective immediately)
- To qualify, the participant must provide sufficient evidence of the terminal illness as required by the IRS.
- The withdrawal may be repaid within three years. If it is not repaid, the income will apply to the year of the withdrawal.
- Impacted by a qualified federally declared disaster (effective for disasters occuring after January 26, 2021)
- The participant can withdraw a maximum of $22,000 without paying the 10% early withdrawal penalty and the withdrawal may be repaid. Additionally, the participant can take out a loan of up to $100,000 (double the normal limit) and has an extra year to repay that loan.
- To qualify, the participant's primary residence must be located in the disaster area, they must have sustained economic loss because of the disaster, and the disaster must have occurred after January 26, 2021.
- A victim of domestic abuse (effective January 1, 2024)
- The participant may request a withdrawal of up to $10,000 or 50% of their account balance, whichever is less. They will have the opportunity to repay the withdrawn amount to their retirement plan over three years and will receive a refund for income taxes on the money they repay.
- To qualify, the participant can self-certify their status as a victim of domestic abuse within one year of the date they experienced the abuse.