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SECURE 2.0

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When the SECURE 2.0 Act of 2022 (SECURE 2.0) was signed into law, it marked another significant expansion in the retirement savings landscape. With many of the provisions effective in 2024, we are asking plan sponsors to let us know if they want to include any of the optional provisions in their plan. To help plan sponsors understand the rules and timelines outlined by SECURE Act legislation, we have created several resources including a table outlining the rules and timelines, and a presentation below.

SECURE 2.0 Key Provisions Presentation

 

The Act has both required provisions that may affect your plan and optional provisions that you may allow in your plan. The provisions are intended to expand coverage, increase retirement savings, and simplify and clarify retirement plan rules. SECURE 2.0 Act builds upon the SECURE Act of 2019.  As a 403(b) plan sponsor, you have some new choices to consider in 2024.

Effective dates for both the mandatory and optional provisions in SECURE 2.0 Act range anywhere from immediate to as far out as 2033. However, there are several optional provisions that can be adopted now, subject to limitations by the recordkeeper.

In-Service Distribution Options

New in-service distribution options, including victims of domestic violence, personal emergencies, and qualified federal disasters. If offered under the plan, a participant may self-certify that he or she meets the requirements to take the in-service distribution.  These distributions are subject to specific dollar limits, are exempt from the 10% early withdrawal penalty that normally applies to pre-mature distributions and can be repaid to the plan within three years.

There are both pros and cons to allowing in-service type distribution options. It may lead to increased retirement savings since the funds can be withdrawn early in case of an emergency.  However, in-service distributions may also largely contribute to plan “leakage” for non-retirement purposes—reducing the employee’s retirement readiness. Employers should consider if these options can, overall, increase plan participation without depleting important retirement savings.

Hardship Distribution Options

New hardship distribution options are available, including self-certification. Participants can self-certify that they meet the requirement of a hardship distribution without substantiating their withdrawal request with receipts, invoices, or other documentation. The change also includes aligning 403(b) hardship distributions with 401(k) plans, permitting hardship distributions on earnings, matching contributions, and nonelective contributions.

There may be possible exceptions to this reliance on self-certification, such as where plan sponsors have actual knowledge that is inconsistent with the certification. Many plan providers may still require an employer to approve the hardship request. Click here for a checklist when reviewing a hardship request.

Roth Treatment for Employer Contributions

Employers may offer Roth treatment for employer contributions. If a 403(b) plan provides for employer contributions, such as matching contributions or nonelective contributions, the plan can be amended to permit participants to elect Roth treatment of those contributions. This provides a new way to accumulate Roth funds for retirement.

Student Loan Payment Contributions Match

Employers may match contributions of student loan payments. If a 403(b) plan provides matching contributions, the plan can be amended to provide matching contributions based on an employee’s payment of his or her student loan debt, similar to matching contributions based on elective deferrals to the plan.

This new provision allows employees to build retirement savings while paying off student loan debt obligation. This provision may be very popular with younger employees entering the workforce with student loan debt.

Important Note

It is important to note that many recordkeepers aren’t ready to implement some of these new provisions. Many recordkeepers need more guidance from the IRS that will clarify how these provisions work. They may also need time to reprogram systems to automate new features, especially for new distributions options, Roth treatment of employer contributions, or matching contributions on student loan payments.

Please keep an eye out for out SECURE 2.0 Roadmap tab coming soon that will have more information on what provisions the WEA TSA 403(b) program has implemented or when the provisions may be available.

This explanation is for informational purposes only and may not be construed as legal or tax advice.  We encourage you to consult with a professional legal or tax advisor before taking a hardship withdrawal from your WEA TSA Trust 403(b) account.

SectionPre-SECURE 2.0Provision descriptionOptional or mandatoryEffective date
MANDATORY
Sec. 107 Increased Age for Required Beginning DateRequired beginning date was increased to age 72 in January 2020Required beginning date age was again increased from age 72 to 73 in 2023, and then to age 75 in 2032 (or the year of retirement, if later, for certain employer plan participants).Mandatory2023
Sec. 311 Qualified Birth and Adoption Distributions (QBADs) Can Be Paid BackPlan sponsor could allow QBADs. QBADs may be repaid to the plan at any time and are treated as rollovers.QBAD repayments must be paid within 3 years from the day after the distribution was made. For QBADs taken before December 29, 2022, distribution must be repaid before January 1, 2026.QBAD distributions are optional, but if selected, this provision is mandatory.2023
Sec. 325 Roth Plan DistributionRequired minimum distributions (RMDs) were required for designated Roth monies at required beginning date.The provision eliminated RMDs from designated Roth accounts held in retirement accounts.Mandatory2024
Sec. 603 Roth Catch-Up ContributionsElective catch-up contributions could be made on a pre-tax or Roth basis.Catch-up contributions for individuals earning more than $145,000 in the previous calendar year must be made as Roth (after-tax) contributions.Mandatory2026 (delayed)
This explanation is for informational purposes only and may not be construed as legal or tax advice. We encourage you to consult with a professional legal or tax advisor before taking a hardship withdrawal from your WEA TSA Trust 403(b) account.
SectionPre-SECURE 2.0Provision descriptionOptional or mandatoryEffective date
OPTIONAL
Sec. 312 Hardship Self-CertificationHardship distributions required employer approval.Employers may rely on employees self-certifying that deemed hardship distribution conditions are met. There may be possible exceptions to this reliance, such as where the plan sponsor has actual knowledge that is inconsistent with the employee's self-certification.Optional2023
Sec. 326 Exception to Penalty on Early Distributions From Qualified Plans for Individuals With Terminal IllnessDistributions to terminally ill individuals were assessed a 10% early withdrawal penalty.Terminally ill employees are exempt from the 10% early withdrawal penalty. The plan may allow distributions to be recontributed back to the plan within 3 years.Optional2023
Sec. 331 Qualified Federally Declared DisastersDistributions in federally declared disaster areas were allowed.The provision provides permanent rules relating to the use of retirement funds in the case of a federally declared disaster. It allows up to $22,000 to be distributed and is not subject to the 10% federal penalty. The plan can allow recontribution of these distributions if the funds were not ultimately used to acquire a residence.Optional2023
Sec. 604 Optional Treatment of Employer Matching or Nonelective Contribution as Roth ContributionsAll employer contributions were made as pre-tax contributions.Employers are allowed to provide participants with the option of receiving employer-matching contributions and employer non-elective contributions on a Roth basis.
There are questions and issues that will require further IRS guidance for the employer to be assured that they are administering this provision correctly, such as tax reporting and taxation.
Optional2023
Sec. 110 Student Loan Payments as Elective Deferrals for Purposes of Matching ContributionsA matching contribution cannot be made based on student loan repayments.Employer contributions made on behalf of employees for “qualified student loan payments” are treated as matching contributions so long as certain requirements are satisfied. Applies to 403(b) plans.Optional2024
Sec. 113 Small Financial IncentivesFinancial incentives were considered prohibited transactions.Employers are allowed to offer small financial incentives, such as gift cards, to join the plan if the incentives are not paid for with plan assets.Optional2024
Sec. 115 Withdrawals for Emergency ExpensesThe law imposes a 10% penalty on early withdrawals before normal requirement age from tax-preferred retirement accounts.Penalty-free withdrawal of up to $1,000 per year for “unforeseeable or immediate financial needs relating to personal or family emergency expenses” is now allowed. Recontributions are allowed if the plan allows.Optional2024
Sec. 127 Emergency Savings Accounts (ESAs) Linked to Individual Account PlansSome employers began offering ESAs, both inside and outside of the qualified plan. The “in-plan” approach is complicated by a lack of clarity with respect to certain ERISA and Code issues.Plan sponsors can amend their plan to offer short-term ESAs as part of a defined contribution plan. ESAs must be funded post-tax with Roth contributions (but segregated from designated Roth contributions) and have a $2,500 maximum cap.Optional2024
Sec. 304 Updating Dollar Limit for Mandatory DistributionsEmployers may immediately distribute, without the consent of the participant, and directly roll over former employees’ retirement.Increases the involuntary cash-out limit from $5,000 to $7,000.Optional2024
Domestic Abuse Penalty-Free DistributionUnable to take a penalty-free distribution for domestic abuse purposes.A participant may take up to $10,000 (or 50% of vested account balance) within 1 year of the date of abuse without penalty. Recontribution within 3 years may be allowed in the plan.Optional2024
Sec. 602 Hardships for 403(b) PlansHardship distributions in 403(b) plans limited distributions to elective contributions.The provision brings hardship regulations in line with 401(k) hardship requirements. The 403(b) plan can now allow hardship withdrawals of earnings attributable to the employee’s elective deferrals as well as distributions from nonelective and matching contribution sources. It also confirms the 403(b) plan participant is not required to take available loans before obtaining a hardship withdrawal.Optional2024
Sec. 120 Auto-Portability RolloversAn employer is permitted to distribute a participant’s account balance without participant consent if the balance is under $5,000 and the balance is immediately distributable. The employer is required to roll over this distribution into a default IRA if the account balance is at least $1,000 and the participant does not affirmatively elect otherwise.A plan service provider is permitted to provide employer plans with automatic portability services. Such services involve the automatic transfer of a participant’s default IRA (established in connection with a distribution from a former employer’s plan) into the participant’s new employer’s retirement plan, unless the participant affirmatively elects otherwise.Optional2024
Sec. 112 Military Spouse Retirement Plan Eligibility Credit for Small EmployersNo tax credit for small employers employing military spouses.Employers receive a tax credit if they (1) make military spouse immediately eligible for plan participation within 2 months of hire, (2) upon eligibility, make the military spouse eligible for any matching or nonelective contribution they would have been eligible for otherwise at 2 years of service, and (3) make the military spouse 100% immediately vested in all employer contributions.Optional2024
Sec. 109 Higher Catch-Up Limits for Ages 60, 61, 62, and 63Aged-base catch-up contributions are limited to the age-50 catch-up limit.Plans can now add another catch-up provision for employees aged 60–63, increasing catch-up contributions to $10,000 (or 150% of the regular age 50 catch-up limit of 2024).
Mandatory Roth catch-up rules applicable to high earners making over $145,000 in FICA wages (as indexed) effective in 2026.
Optional2025
Saver’s MatchCurrent taxpayer tax refund.Current taxpayer tax refund will be paid as a saver’s match rather than a credit. Plan must allow contribution in the plan.Optional2027
This explanation is for informational purposes only and may not be construed as legal or tax advice. We encourage you to consult with a professional legal or tax advisor before taking a hardship withdrawal from your WEA TSA Trust 403(b) account.
  1. Review SECURE 2.0 Act Key Provisions.
  2. Watch the SECURE 2.0 Key Provisions presentation here.
  3. Look for an email in the coming weeks from WEAPlanAdmins@weabenefits.com letting you know that the 403(b) Plan SECURE 2.0 Operation Checklist is ready for you to complete.
  4. Log into your WEA Plan Document portal and review the 403(b) Plan SECURE 2.0 Operation Checklist.
  5. Complete the 403(b) Plan SECURE 2.0 Operation Checklist.

This explanation is for informational purposes only and may not be construed as legal or tax advice.  We encourage you to consult with a professional legal or tax advisor before taking a hardship withdrawal from your WEA TSA Trust 403(b) account.