When Does the SECURE Act 2.0 Take Effect?

The SECURE Act 2.0, signed into law on December 29, 2022, is a legislative package designed to expand retirement savings opportunities for individuals and simplify existing rules governing retirement plans. It builds upon the foundation of the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which also sought to bolster retirement security. The new act introduces numerous provisions, but these changes have varied effective dates, impacting both individuals and employers differently depending on the specific provision.

Overarching Effective Dates

While the SECURE Act 2.0 was enacted at the end of 2022, many of its provisions were not immediately effective. The law intentionally structured a staggered implementation timeline for its various changes. This approach allows a transition period for retirement plan administrators, employers, and financial institutions to adapt their systems and processes to comply with the new requirements. Many provisions became effective on specific dates, such as January 1, 2023, January 1, 2024, or January 1, 2025. Some significant changes are scheduled for even later, extending into 2033. Understanding these distinct effective dates is important for individuals to plan their retirement contributions and distributions, and for employers to ensure their retirement plans remain compliant with federal law.

Provisions Effective in 2023

Several notable provisions of the SECURE Act 2.0 took effect in 2023, immediately impacting retirement savers. One significant change was the increase in the age for required minimum distributions (RMDs) from retirement accounts. Previously set at age 72, the RMD age was raised to 73 for individuals turning 72 after December 31, 2022.

The act also reduced the excise tax penalty for failing to take a timely RMD. This penalty was cut from 50% to 25% of the amount not distributed, and further reduced to 10% if the shortfall is corrected within a specified timeframe. These changes apply to taxable years beginning after December 29, 2022.

Changes to qualified charitable distributions (QCDs) also began in 2023. While the annual limit for QCDs remained at $100,000 for 2023, it became indexed for inflation starting in 2024. Additionally, individuals aged 70½ or older gained the ability to make a one-time QCD of up to $50,000 (adjusted for inflation) to a split-interest entity like a charitable remainder trust or charitable gift annuity, effective January 1, 2023.

Employers gained new options for Roth contributions, effective December 29, 2022. They can now offer employees the choice to designate employer matching and non-elective contributions as Roth contributions, which are made on an after-tax basis. This allows for tax-free withdrawals of these contributions and their earnings in retirement. The act also enhanced tax credits for small businesses establishing new retirement plans, increasing the credit for startup costs to 100% (up to $5,000) for employers with up to 50 employees, effective for taxable years beginning after December 31, 2022.

Provisions Effective in 2024

The year 2024 brought additional significant provisions into effect under the SECURE Act 2.0. A key change eliminated pre-death RMDs for Roth accounts held within employer-sponsored retirement plans, such as 401(k)s. This means that, similar to Roth IRAs, these Roth workplace accounts are no longer subject to RMDs during the original owner’s lifetime, allowing for continued tax-free growth. This provision became effective for taxable years beginning after December 31, 2023.

Employers gained the option to offer pension-linked emergency savings accounts (PLESAs) to their employees, effective for plan years beginning January 1, 2024. These accounts are designed to help non-highly compensated employees save for short-term financial needs. Contributions to PLESAs are capped at $2,500 annually, which is indexed for inflation, and the first four withdrawals per year are tax- and penalty-free.

Another provision allows employers to treat employee student loan payments as elective deferrals for matching contribution purposes, effective as of 2024. This enables employers to make matching contributions to a retirement account even when an employee is prioritizing student loan repayment. Additionally, new “starter” 401(k) plans became available for employers who do not currently offer a retirement plan, effective in 2024. These plans allow employee deferrals up to $6,000, indexed for inflation, plus a $1,000 catch-up contribution for those aged 50 and over.

Provisions Effective in 2025 and Later

Looking ahead, the SECURE Act 2.0 includes several provisions with effective dates in 2025 and beyond. For individuals aged 60 through 63, enhanced catch-up contributions to 401(k), 403(b), and governmental 457(b) plans will become available starting January 1, 2025. This allows for a higher contribution amount, specifically the greater of $10,000 or 150% of the regular catch-up limit, which is projected to be $11,250 in 2025. This enhanced limit applies until the individual reaches age 64, after which the standard catch-up limits apply.

A separate rule regarding catch-up contributions for high earners will take effect in 2026. For individuals whose wages exceeded $145,000 (indexed for inflation) in the prior calendar year, all catch-up contributions to a workplace plan will need to be made to a Roth account. This provision was initially scheduled for 2024 but was delayed to allow for further guidance and implementation.

Mandatory automatic enrollment will apply to new 401(k) and 403(b) plans established after December 29, 2022, for plan years beginning after December 31, 2024. These plans will be required to automatically enroll eligible employees at a contribution rate of at least 3% but not more than 10%, with annual increases until the rate reaches at least 10% but not more than 15%. Exceptions apply for new businesses (operating for less than three years) and small employers with 10 or fewer employees.

The eligibility requirements for long-term part-time (LTPT) employees to participate in 401(k) plans will also be further simplified. Effective for plan years beginning after December 31, 2024, the service requirement for LTPT employees will be reduced from three consecutive years to two, requiring at least 500 hours of service in each of those years. Finally, the RMD age will increase once more, from 73 to 75, effective January 1, 2033. This provides an even longer period for retirement savings to grow tax-deferred.