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FGMK Tax Alert – Secure Act 2.0 Impact to Qualified Retirement and 529 Plans

Posted by : on : January 10, 2023 | 11:16 pm

As part of the $1.7 trillion spending bill Congress passed and President Biden signed into law at year-end, a series of new laws—known collectively as Secure Act 2.0—has provided favorable changes to both qualified retirement plans and Section 529 plans.  This FGMK Tax Alert provides a summary of these key changes.



Changes to Required Minimum Distributions (RMDs)


Currently, taxpayers are required to start taking RMDs from their retirement accounts at age 72. However, starting in 2023, that age requirement will increase to 73.


  • This new law does not impact participants who were required to make RMDs in prior years.


    • For example, if you turned 72 in 2022, you are still required to take your first RMD by April 1, 2023. However, if you turn 72 in 2023, you do not need to take your RMD until the following year, when you turn 73.


    • Notably, this change moves the deadline for your first withdrawal to April 1, 2025 (because absolute deadline of your first RMD in 2024 will be due on April 1, 2025).


  • The penalty for missing RMDs is being reduced from 50 percent of the withdrawal amount to 25 percent. Furthermore, the penalty decreases to 10 percent if the missing RMD is taken by the end of the next year.


  • Effective in 2024, the post-death RMD options for surviving spouses would include the ability to elect to be treated as the deceased spouse.
    • Once the election is made, it cannot be revoked except with the consent of the Secretary.
    • A surviving spouse who makes this election would begin taking RMDs no earlier than the date the deceased spouse would have reached the applicable RMD age.
    • If the surviving spouse dies before RMDs begin, the RMD rules would apply as if the surviving spouse was the employee.  This means that the surviving spouse's beneficiaries will be treated as though they were the original beneficiaries of the account.


  • While there are currently no RMDs required for Roth IRAs, there are still required distributions for Roth 401(k)s. However, the Secure Act 2.0 eliminates this RMD for account holders who are alive at date of passage.


In 2033, the age for RMDs increases to 75.


Increased Catch-up Contributions


Currently, those over 50 can invest an additional $7,500 in their 401(k) or 403(b) plan in what is known as a catch-up contribution.


  • That amount will increase to $10,000 starting in 2025 for those ages 60 to 63.
  • Additionally, effective in 2024, the IRA catch-up limit will be increased for inflation each year. This increase will be indexed at $1,000 extra per year.


Catch-up Roth Contributions


Under current law, catch-up contributions to qualified retirement plans can be made on either a pre-tax or Roth (post-tax) basis. Effective 2024, for those participants earning at least $145,000, all catch-up contributions will be subject to Roth post-tax treatment.


Roth 401(k) Matching


Under current law, if an employer offers a retirement match, the match needs to be distributed into a traditional 401(k) on a pre-tax basis, even if the employee has a Roth 401(k).


  • The new legislation will permit employers to offer Roth 401(k) matching contributions.
  • Like other Roth contributions, employees will pay taxes on their Roth match up front and be able to take it out later tax-free.


401(k) Savings Accounts


Employers will now be able to enroll their employees automatically in savings accounts linked to their 401(k)s.


  • They can also match the emergency savings, though the match would be in the form of a retirement account contribution.
  • Employees earning under $150,000 starting in 2023 qualify for these accounts, resulting in savings of up to $2,500. The savings works like a Roth contribution (or contribution to a regular savings account); additional contributions will be diverted to a Roth account.


Emergency 401(k) and IRA Withdrawals


  • The legislation will make it easier for workers to withdraw funds from their retirement accounts penalty-free in the case of personal or family emergencies such as a terminal illness or natural disaster.
  • One emergency distribution up to $1,000 will be permitted each year starting in 2024. If the taxpayer does not repay that $1,000 in three years, they cannot take another distribution during that time.
  • Additionally, starting in 2024, domestic abuse survivors will be allowed to take penalty-free withdrawals of the lesser of $10,000 or 50 percent of their retirement account. They can repay that within three years, and if they do, they will be refunded the income tax they paid on the withdrawal.


401(k) Automatic Enrollment


The legislation requires employers starting new retirement plans in 2025 or after to automatically enroll their employees in a 401(k) or 403(b) plan. The automatic enrollment will start at 3 percent of the employee's paycheck and cannot exceed 10 percent. Each year, the contribution will automatically increase by 1 percent.


Student Loan Payment Match


The legislation will allow employers to make matching contributions into a retirement account for employees who are making student loan payments, even if they are not contributing to their 401(k)s.


  • The match would mirror a retirement match.
  • This also applies to those with 403(b)s, 457(b)s, and SIMPLE IRAs.


Rollover 529 Funds


Unused 529 accounts are assessed a penalty for withdrawal of those funds for non-educational purposes. Starting in 2024, the Secure Act 2.0 allows beneficiaries of 529 accounts to roll over up to $35,000 (in a lifetime) into a Roth IRA.


  • The 529 needs to have been open for at least 15 years for a beneficiary to do this.
  • The rollover amount is subject to the annual contribution limit for Roth IRAs; it may require the movement of the funds spread over multiple years to avoid a penalty.


National 401(k) Registry


Finally, the bill will create a national lost-and-found registry for 401(k)s. Currently, states operate their own versions, leading to confusion for many workers.  The database will be searchable online, allowing workers to search for their plan administrator.


For any questions regarding this or other potential planning ideas arising from the SECURE Act, please contact FGMK.


The summary information in this document is being provided for education purposes only. Recipients may not rely on this summary other than for the purpose intended, and the contents should not be construed as accounting, tax, investment, or legal advice. We encourage any recipients to contact the authors for any inquiries regarding the contents. FGMK (and its related entities and partners) shall not be responsible for any loss incurred by any person that relies on this publication.


About FGMK


FGMK is a leading professional services firm providing assurance, tax and advisory services to privately held businesses, global public companies, entrepreneurs, high-net-worth individuals and not-for-profit organizations. FGMK is among the largest accounting firms in Chicago and one of the top ranked accounting firms in the United States. For over 50 years, FGMK has recommended strategies that give our clients a competitive edge. Our value proposition is to offer clients a hands-on operating model, with our most senior professionals actively involved in client service delivery.