We first wrote about the SECURE 2.0 Act in November of 2020, when it looked as though it would be easily passed by year-end. SECURE 2.0 addressed remaining issues from SECURE 1.0, and had bipartisan support. Post-election Congressional squabbling prevented the 2020 version of SECURE 2.0 from getting passed. The revised Bill has now been passed out of Committee by unanimous voice vote, and is headed to the floors of Congress.
2020 was not a complete legislative bust, as the Trump Administration was able to pass both the CARES Act and SECURE 1.0. SECURE 1.0 addressed provisions for owners of Retirement Accounts, and the CARES Act addressed the sudden lack of income from employment, as the country shut down from COVID-19. Both of these sweeping Bills were passed with huge bipartisan majorities. Many significant changes were made in each, and most people were affected by some of those changes.
Certain items from the 2020 Bill were updated and renegotiated into the 2021 version, ostensibly to save money (government money, not yours). Consequently, not all changes were as user-friendly as last year’s failed attempt. That said, it was not all bad, either.
- Repeal of Age Limits for IRA Contributions. There was no change in this part of the Bill. However, changes will affect some future contributions, as described below.
- Required Beginning Date for Minimum Distributions (RMDs) from age 70-1/2 to 72 for people born after June 30, 1949. The proposed Bill from 2020 would have raised the RMD age from 72 to 75 after 2021. Instead, the 2021 Bill would raise the RMD age over 10 years as follows; in 2022 the RMD age will be 73, in 2027 it will become 74, and in 2032 the RMD Age will become 75.s
- Proposed Catch-up Contributions – the Good. Retirement savers over age 49 have long had the ability to make supplemental, or Catchup, contributions to their accounts. Under SECURE 2.0, contribution limits for ages 62, 63, and 64 would be increased to $10,000 annually. Also, starting in 2023, Catch-up Contributions would be indexed to inflation.
- Proposed Catch-up Contributions – the Bad. Apparently, all Catch-up Contributions would have to be made on a Roth basis (not tax-deductible). This remains uncertain at this moment, and we will report once the Bill is finalized.
Researching SECURE 2.0 provisions leaves uncertainty to those of us who are not attorneys. We will keep you posted as clarifications or reconciliation changes are made. For now, at least, passage appears imminent.
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