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Congress Passed Secure Act 2.0

We hope everyone had a great start into the New Year. Our team is gearing up for tax season, and will be in touch later this month with our instructional email for 2022 taxes. You may or may not be aware that congress passed Secure Act 2.0 on December 29th, establishing new laws, many which are effective in 2023. We wanted to share a few key takeaways. As always, please do not hesitate to reach out with questions.

RMD Changes

· The Required Minimum Distribution (RMD) age has been pushed back again. In 2023 we are moving from age 72 to 73. In 2033, the age will get pushed back to 75.

o We will continue to keep track of this for you and help process all RMD’s as required.

· This change does not impact Qualified Charitable Distributions (QCDs) from IRAs which can continue to be made any time after age 70½. In 2024 the maximum QCD amount will be indexed for inflation.

o You are now able to make a one-time gift up to $50,000 to a charitable remainder unitrust, charitable remainder annuity trust or charitable gift annuity using the QCD.

· The penalty for failing to take an RMD will decrease from 50% to 25% of the RMD amount not taken.

· In 2024 there will be no RMD requirement for Designated Roth Accounts (DRAs) such as a Roth 401(k) or Roth 403(b).

· Post–Death Options for Surviving Spouse Beneficiaries of tax deferred accounts will change in 2024 including an option to be treated as the decedent (the deceased individual). Every situation is different and depends on a variety of factors, such as decedent age, spousal beneficiary age as well as cash flow requirements.

Roth Account Changes

· Employers are now able to provide matching Roth account distributions for their employees.

o Before this act passed, employer funding was only on a pre-tax basis.

o If an employee decides to go with the Roth option, the employer’s contribution will be included in the employee’s gross income for that year.

· Catch-up contributions will change for employees with total wages greater than $145,000. These employees will need to make their catch-up contributions into a Roth account. We are seeing different sources reflect different timelines of when this will begin (2024 or 2025). We will track this through 2023 and confirm.

Catch-Up Contribution Limit

· IRA catch-up contribution limits will be indexed for inflation in 2024.

· 401(k) and similar plans will continue to have catch up contribution limits of $7,500 for people 50 and up in 2023.

· Starting in 2025 there will be a special catch-up contribution limit for people between 60-63 years of age. The new maximum for this age group will be $10,000 or 150% of the previous year’s catch up contribution (also indexed for inflation).

529 Plans & Roth Accounts

· A 529 Plan that has been maintained for at least 15 years can now be transferred to a Roth IRA in the beneficiary’s name.

o There are multiple regulations around this type of transfer such as a compensation requirement of the beneficiary, the regular IRA contribution limits still apply and there is a maximum lifetime transfer amount of $35,000.

o The experts we are listening to are suggesting it not be a planning tool, as the law could change within 15 years, but instead be a tool for existing overfunded 529s.

Specialty Distributions

· Terminal Illness Distributions: The biggest change here is that the time horizon has been extended from 24 months to 84 months. There is no distribution limit.

· Victims of Domestic Abuse Distributions: The maximum distribution limit is the lesser of $10,000 or 50% of vested balance. The distribution must be taken within a year of the incident and is repayable for up to 3 years.

· Disaster Recovery Distributions: There is a maximum lifetime distribution limit of $22,000 that applies to IRAs and employer plans. The distribution should occur within 180 days of the disaster. This is repayable for up to 3 years. There is also a loan option for disaster hardship and the amount has increased from $50,000 to $100,000. The loan payments may be delayed for up to 1 year.

There are many other provisions in this act, but we have listed the ones we feel are most relevant to our client base.


Jeffrey Levine “SECURE Act 2.0: Later RMDs, 529-to-Roth Rollovers, And Other Tax Planning Opportunities”, Kitces Nerds Eye View, 12/28/2022

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