Securing A Future with the Governments Secure Act 2.0

If you don’t keep up with financial news, you may have missed this story about a new bill the House has recently passed. It’s called Secure 2.0, and, as the name implies, the goal is to help secure a better retirement for US citizens.

 

According to Investopedia, SECURE 2.0 is a legislation that is built on and expands the SECURE Act of 2019 to improve retirement savings accounts. One of the most popular provisions of SECURE 2.0 is allowing employers to offer matching retirement contributions to employees paying off student loans. Under the proposed rules, employees would earn employer matching contributions by making student loan payments instead of contributions to the company’s 401(k)

 

As luck would have it, the Senate (alongside the Congress) is also on the case and has its version of the bill in the works (Retirement Security and Savings Act). There’s a similar end game, with some differences on bill of the Senate and Congress.
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For example, both plans:

– Allow some part-time employees to be eligible for their employer’s 401(k) when they have worked over 500 hours across two consecutive years.
– Allow employers to more easily contribute to their employee’s 401(k) when they have student loan payments and can’t contribute normally.

 

The significant differences are:

– The House bill includes a plan to address revenue losses.
– The House bill requires automatic enrollment of employees in their 401(k) plan (the rate being at least 3% and increasing each year until the employee contributes 10% of their pay). Exceptions: businesses with ten or fewer employees and those open for less than three years.
– The Senate’s version of the bill doesn’t include these things I just mentioned above.

 

​Also notable, both bills address catch-up contributions but have approached it differently.

 

The current plan has an option to provide a “catch up” contribution to your retirement savings over the current annual contribution limits. Essentially you can put an additional $6,500 into your 401k or $1,000 into your IRA if you’re over 50 and need to, well, catch up.

 

​The House bill would change that amount to $10,000 for individuals aged 62 – 64 (starting in 2024). If you’re enrolled in a SIMPLE plan, your catch-up contribution would be $5,000 from the current $3,000.

 

The Senate’s version would allow $10,000 for people age 60 or older.

 

There is much more to the proposed bill, and it may change the game for many folks – maybe even you!

 

​But what ends up making it into law could be dramatically different. Either way, just like when the Secure Act came out in 2020, we will notify you of what ends up making it into law and let you know how it will affect your life including any strategies to take advantage of any opportunities that will pop up.

 

Always feel free to shoot an email or give us a call if you have questions.

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