Page 69 - BusinessWest February 20, 2023

ACCOUNTING & TAX PLANNING >>
Save and SECURE
Updated Act Introduces New Rules, Incentives to Promote
Retirement Plans
BY DAN EGER
The SECURE Act, or Setting Every Community Up for Retirement Enhancement Act, was signed into law in December 2019. This leg- islation made it easier and more affordable for individuals to save for retirement by introducing new rules and incentives that promote long- term savings.
The SECURE Act also supports small businesses by making it easier for them to offer retirement plans to their employees.
Overall, the SECURE Act aimed to make retirement savings more accessible and secure for Americans of all ages and economic backgrounds.
The 2019 legislation included changes that affected traditional 401(k)s and IRAs, such as expanded eligibility for opening a Roth IRA, new requirements for minimum distributions from retirement accounts, and incentives for small businesses to offer retirement plans. The law also included provisions to benefit those who are retired or disabled, such as increasing the age at which a person must begin taking required minimum distributions from 701⁄2 to 72.
Legislation commonly referred to SECURE 2.0 Act (the Consolidated Appropriations Act of 2023) was signed into law on Dec. 29, 2022. The SECURE Act 2.0 bolsters the benefits offered in 2019’s version, mak- ing it more enticing for employers to provide retirement plans and improve employees’ retirement prospects along the way.
What follows is a summary of some of the provisions, but keep in mind that the act includes more than 90 provisions that potentially affect retirement-savings plans.
Mandatory Automatic Enrollment
Effective for plans beginning after Dec. 31, 2024, new
401(k) and 403(b) plans must automatically enroll employees when eligible. Automatic deferrals start at between 3% and 10% of compensation, increasing by 1% each year to a maximum of at least 10%, but no more than 15% of compensation. Partici- pants can still opt out.
Automatic Escalation
Beginning in 2025, for new retirement plans started after Dec. 29, 2022, contribution percentages must auto- matically increase by 1% on the first day of each plan year following the completion of a year of service until the contribution reaches at least
10%, but no more than 15%, of
eligible wages. Governmental
organizations, churches, and
businesses with 10 employees
or fewer, as well as employ-
ers in business for three years
or fewer, are exempt from this
policy.