The SECURE 2.0 Act of 2022 builds on the improvements made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 with changes affecting qualified retirement plans, IRAs, SIMPLE IRAs, SEP IRAs, ABLE accounts and 529 plans.
The following highlights some key changes that impact investors and are effective now or will become effective in the next 12 months. We are currently reviewing the new legislation to determine additional impacts for our IRA, 529 and retirement plan investors and will continue to provide updates as more information becomes available.
Q: Did the RMD age change?
A: Yes. Effective in 2023, the RMD age increased from age 72 to age 73. Investors turning 72 in 2023 will not be subject to RMDs until they turn age 73 in 2024.
Q: I reached 72 in 2022 and haven’t taken my 2022 RMD. Do I still have to take my 2022 RMD by April 1, 2023?
A: Yes. The changes do not impact investors who turned 72 in 2022 or earlier. Individuals who reached age 72 during 2022 must still take their first RMD by April 1, 2023.
Q: I turn 72 in 2023 and established automatic withdrawals to begin taking my RMD payments in 2023. Will the RMD be automatically deferred until age 73?
A: No. Investors and/or financial professionals need to direct us to modify or defer automatic withdrawal plans. We can take the request verbally or in writing.
Q: I already took my 2023 RMD from my IRA. Can it be returned?
A: If you are not required to take a 2023 RMD, you can complete an indirect rollover back into your IRA, provided the rollover is done within 60 days of the distribution. Investors should complete and return the Indirect Rollover Request.
You are allowed only one indirect rollover from an IRA to another (or the same) IRA in a 12-month period.
Q: Are RMDs required from employer-plan Roth accounts?
A: Effective in 2024, investors with Roth 401(k)s or 403(b)s will no longer be required to take lifetime RMDs from those accounts. Distributions from employer Roth accounts will be more in line with traditional (non-employer) Roth IRAs, which do not require withdrawals until after the death of the account owner.
Q: Can money in a 529 account be rolled over into a Roth IRA?
A: Starting in 2024, 529 education plan assets can be rolled over directly into a Roth IRA for the beneficiary of the 529 plan, within certain limitations. For investors who are concerned about overfunding their 529s, they will now have an option to access at least a portion of leftover assets without taxes or penalties.
Limitations to this provision include:
The income limitations for regular Roth IRA contributions do not apply to 529-to-Roth rollovers. However, the beneficiary may be required to have earned income of some kind to qualify for a rollover.
Note: 529-to-Roth rollovers include some open issues for which we would expect regulatory guidance prior to the 2024 effective date, including, for example, whether beneficiaries need to have earned income.
Q: Are there changes to the rules about catch-up contributions for higher earners?
A: Yes. Starting in 2024, catch-up contributions to qualified retirement plans for higher earners (individuals who earn $145,000 or more) are required to be Roth after-tax contributions, even if regular contributions are pretax. This change will not apply to catch-up contributions made to IRAs.