Advanced Markets Minute – January 2023

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Welcome to the Advanced Markets Minute in both print and audio form. Today we’re going to discuss key provisions of Division T of the Consolidated Appropriations Act of 2023, better known as SECURE 2.0

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After widespread bipartisan support, the long discussed SECURE 2.0 has passed both houses of Congress and was signed into law by President Biden on December 29, 2022

Just like the SECURE Act of 2019 made significant changes to retirement accounts, SECURE 2.0 implements many more changes and expands on some changes made by the original Act. The new law has close to 100 provisions, but several of them are critical to the retirement planning process. Here are some of the most important changes that will impact financial advisors:

  • The RMD age will change from the current 72 to age 73 on January 1, 2023, and then to age 75 on January 1, 2033.
  • Businesses with 50 or fewer employees will enjoy a plan startup credit of 100%, effective December 31, 2022.
  • The IRA catch-up limits for those 50 and older will be indexed to inflation starting December 31, 2023. In 2025 the catch-up for those at least 60 years old but not yet 64 will be $10,000, or possibly more depending on inflation adjustments.
  • Beginning in 2024, plan participants can take one emergency distribution of up to $1000 in any year without incurring the 10% tax penalty. They would have three years to pay it back, and after paying it back they could take another distribution.
  • Starting in 2024, beneficiaries of 529 plans can make tax and penalty free rollovers of up to $35,000 to a Roth IRA under certain conditions.
  • The QLAC limitation of 25% of the account balance is repealed for new QLACs, and the cap for a QLAC is raised to $200,000, also indexed for inflation.
  • The 50% excise tax for failure to take an RMD is reduced starting in 2023 to 25% and is decreased to 10% if the failure is corrected in a timely manner.
  • The pre-death distribution requirement for employer-sponsored Roth accounts is eliminated after December 31, 2023.
  • Beginning three years after the effective date of the Act, plan participants can take up to $2500 per year to pay premiums on certain long term care insurance contracts without incurring the 10% tax penalty.
  • Employer matching contributions can now be made into either a pre-tax or a Roth account.

This is just a few of the important changes coming from SECURE 2.0. Call us in Advanced Markets if you have any questions.

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This is for informational purposes only. Recommendations for financial product or financial strategies must be suitable for the individual based on their circumstances. Mutual of Omaha does not give tax advice.