SECURE 2.0 – It Could Be of Great Benefit

by | Jan 25, 2023 | Tax Planning, tax planning and estate planning


SECURE 2.0, the sweeping package that has just passed into federal law, contains several boosts for higher-income people. Intended as an upgrade to the Setting Every Community Up for Retirement Enhancement Act of 2019, SECURE 2.0 is part of the Consolidated Appropriations Act of 2023.

 

Smart Asset.com highlights a number of specific provisions that we believe can prove of significant benefit to Geyer Law clients:

1. Starting in 2024, unused money in college savings plans can be rolled into tax-free Roth accounts.

2. Penalties for failing to take required minimum distributions from individual retirement accounts and 401(k) plans will drop by half. (Previous to this legislation, withdrawing money from a 529 for a non-qualifying reason would generate income tax plus a 10% tax penalty on earnings.)

3. Companies will be required to enroll employees in 401(k) and 403(b) plans.

4. Companies will be allowed to make matching contributions to workers’ employer-sponsored Roth accounts, as well as to match student loan payments with contributionsto the retirement plan.

5. Early withdrawal penalties will be eliminated for hardship distributions (terminally ill employees and those living is declared disaster areas).

6. “Catch-up” contributions to retirement plans will rise for those over 50 beginning in 2025.

7. The age to start taking minimum distributions rises to 73 in 2023 and 75 in 2033

8. People age 70½ or older can make a one-time gift up to $50,000 from a taxable IRA to a popular type of trust

Since at Geyer Law, many of our clients are small business owners, many of the new SECURE 2.0 provisions will directly affect those business owners and their employees.

  1. For businesses with 50 or fewer employees, the tax credit for plan start-up expenses will increase from 50% to 100% (up to $5,000 per employee).
  2. A new tax credit will be available for employers for contributing to the retirement plan on employees’ behalves.

In a variety of ways, SECURE 2.0 could be of great benefit to our business owner and estate planning clients.

– by Ronnie of the Rebecca W. Geyer & Associates blog team