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Retirement Planning Reimagined: The Impact of SECURE Act 2.0 on Your Future

ARTICLE | December 11, 2023

The Setting Every Community Up for Retirement Act 2.0, or SECURE Act 2.0, is a new retirement tax law approved by Congress on December 23rd. This legislation builds on the original SECURE Act 1.0, passed in 2019, and implements significant changes to retirement planning. This article will explore some of the key features of the SECURE Act 2.0 and how they can impact both employers and employees.

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One of the most notable provisions of the SECURE Act 2.0 is the inclusion of employer matching contributions to employee retirement plans based on student loan payments. Set to take effect from January 1, 2024, this provision enables employers to match contributions to an employee's 401(k), 403(b), 457(b), or SIMPLE employer-sponsored retirement plan if the employee is making student loan payments. 

To qualify for these matching contributions, the student loan payments must be for a certified higher education cost, such as tuition, fees, books, and related expenses. The employee must also have been at least a half-time student in a program leading to a degree or certificate. Each year, the employee is required to certify that loan payments have been made. Employers can rely on this certification without needing to obtain payment and loan documentation support.

The SECURE Act 2.0 also extends the RMD age to 73, reduces the penalty for missing an RMD, allows for employer matching to the Roth, and increases the contribution to a Qualified Longevity Annuity Contract (QLAC). Additionally, it raises retirement plan catch-up contributions for those aged 60-63 starting in 2025 and allows a 529 to Roth IRA rollover from 2024.

Moreover, the SECURE Act 2.0 introduces Roth SEP IRA or SIMPLE IRA options and allows for a $50,000 IRA Charitable Rollover to a Charitable Gift Annuity or Charitable Remainder Trust. These new provisions provide individuals with more flexibility in planning their retirement and can have a significant impact on their financial plan. 

However, before adopting a student loan match under SECURE 2.0, employers need to consider whether it makes business sense. This could involve assessing the number of employees currently repaying qualified student loans and the roles they hold. Employers should also weigh the costs and administrative burdens of the student loan match. This provision may be particularly beneficial to employers looking to assist all employees with student debt, irrespective of salary level or job function.

The SECURE 2.0 provides a framework for the student loan match, but many administrative and implementation questions remain. The US Department of the Treasury and IRS is expected to provide further guidance to fully implement this feature. As the situation evolves, it's crucial to stay informed and consult with a professional for advice tailored to specific circumstances. 

In conclusion, the SECURE Act 2.0 introduces several changes to retirement planning that could significantly impact both employers and employees. As such, it's essential to understand these changes and how they may affect you or your business. If you have any questions or need assistance, consider reaching out to a professional knowledgeable in this area. Remember, staying informed can be the first step towards making the most of these new opportunities.

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