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On December 29, 2022, the SECURE 2.0 Act of 2022 (Secure Act 2.0) was enacted as part of the Consolidated Appropriations Act, 2023, completing a more than one-year process of developing pension reform legislation. The legislation combines provisions from three bills: (i) Securing a Strong Retirement Act of 2022 (H.R. 2954), (ii) Enhancing American Retirement Now (EARN) Act (S. 4808), and (iii) the Retirement Improvement and Savings Enhancement to Supplement Health Investments for the Nest Egg (RISE & SHINE) Act (S. 4353).
Action Item: Secure Act 2.0 makes wide-ranging changes to qualified plans, with most changes applying to all plans but some rules applying only to new plans. The provisions have various effective dates. Employers need to consider which rules are mandatory, which are elective, and the specific effective dates, to determine how the legislation will impact their plans.
Under Secure Act 2.0, the following changes are required:
Under Secure Act 2.0, the following changes are permissible options for employers:
Observations: Many provisions of Secure Act 2.0 will impact the administration of qualified retirement plans, so employers should consider discussing the implementation of these changes with their benefit plan administrator. For example, under the new law PBGC Variable Rate Premium rates will no longer be indexed for inflation, which may be a significantly welcome change for underfunded defined benefit plans. Plan sponsors also may want to re-evaluate their retirement plan benefits in addressing their organization’s key business objectives when considering the new options that now will be available.
Numerous other provisions of Secure Act 2.0 impact certain specific situations (e.g., multiple employer 403(b) plans, small employers, ESOPs, and distributions to firefighters or certain first responder benefit payments), so a comprehensive review of the applicable provisions of the law should be performed on a case-by-case basis.
Global and US Tax Knowledge Management Leader, PwC US