It’s 2024: Which Provisions of SECURE Act 2.0 Are in Effect Now?

At the end of 2022, Congress passed an omnibus spending package that included a number of significant changes to retirement plan rules, which became known as SECURE Act 2.0. We wrote a blog article at the time about the most relevant changes for our clients, including the jump to age 73 for starting Required Minimum Distributions from retirement accounts, which took effect in 2023. However, there were several provisions not projected to take effect until 2024. Most of those provisions are now in force, but, due to logistical complications, the IRS pushed the start date for one key change farther down the pike, so we will review the most relevant 2024 provisions and their current status here.

Surviving Spouse Can Take RMDs from an IRA According to the Age of Deceased Spouse? YES. Starting in 2024, a surviving spouse who inherits an IRA can now elect to be treated as the deceased spouse for the purposes of Required Minimum Distributions (RMDs) from that account. In other words, they do not have to start taking RMDs until the deceased spouse would have, and they can use the decedent’s age and the Uniform Lifetime table to calculate RMDs instead of using the Single Lifetime table for beneficiaries, which will result in a lower RMD amount for the surviving spouse. These changes will be particularly useful if the deceased spouse was younger than the surviving spouse.

“Extra” 529 Assets Can Be Rolled into a Roth IRA? YES! Starting in 2024, leftover 529 account assets that are no longer needed for education expenses can now be rolled over into a Roth IRA for the beneficiary as long as:

• the rollover amount (plus any other amounts that the beneficiary has contributed to a traditional or Roth IRA that year) is less than the annual IRA contribution limit ($7,000 for 2024),
• the 529 account has been open for more than 15 years,
• the contributions being moved from the 529 have been in the account for more than 5 years, and
• the total lifetime amount moved from the individual’s 529 account to a Roth IRA does not exceed $35k.

For clients in Virginia, the Virginia 529 website already has made adjustments in light of this change. To initiate a 529-to-Roth-IRA rollover, go to the “Manage My Accounts” tab and select “Roll Over Funds to Roth IRA.” Note that the beneficiary must already have a Roth IRA established at an outside brokerage prior to initiating the rollover, and you must certify that the rollover meets all of the criteria mentioned above.

Catch-Up Contributions for High Earners Must Be Directed to Roth Retirement Accounts? NOT YET. SECURE Act 2.0 mandated that, starting in 2024, any catch-up contributions to 401(k), 403(b), or 457(b) accounts for high income employees (earning wages over $145k from the same employer in the previous calendar year) would have to be made to the Roth version of their retirement plan. If a Roth version of the retirement plan was not available, then no one would be allowed to make any type of catch-up contributions to that plan. Given the amount of logistics required for employers to adapt to this change, the IRS decided in August to delay implementation of this provision until 2026.

Annual IRA Catch-Up Contribution and QCD Limit Now Indexed to Inflation? YES. The annual IRA catch-up contribution limit (for those over age 50 who are saving to IRA accounts) has remained fixed at $1,000 since 2006. Similarly, the amount that a taxpayer can give tax-free to charity directly from an IRA (through Qualified Charitable Distributions, or QCDs) has held steady at $100,000 since QCDs were first established in 2006. The SECURE Act 2.0 stipulated that starting in 2024, both of these limits would be indexed to inflation. This is evident in the new limit for QCDs ($105,000 for 2024), but inflation was so modest in 2023 that, based on the rules for calculating a catch-up contribution increase, no increase was required this year, and the catch-up amount remains at $1,000 for now.

Student Loan Repayments Can Be Eligible for 401(k) Match? YES. Beginning in 2024, employers can now match employees’ student loan payments with contributions to their retirement plan accounts. This could be a major boost for clients who want to be saving more for retirement but are saddled with significant student loans. Whether employers adopt such a program is at their discretion though, so it is not yet clear how widely this change will be adopted.

Roth 401(k) and Roth 403(b) Balances No Longer Subject to RMDs? YES. Beginning in 2024, balances in employer Roth plans, such as Roth 401k or Roth 403b accounts, are no longer subject to RMDs (similar to current rules for Roth IRAs).

Savers Can Tap Retirement Accounts or Emergency Savings Accounts for Minor Emergency Expenses without Penalty? YES. Retirement plan participants can now make one withdrawal per year (up to $1,000) from their retirement accounts for emergency expenses without an early withdrawal penalty (which is usually 10%). Such emergency withdrawals are still subject to ordinary income tax though. In addition, employers can now offer an emergency savings account linked to employees’ retirement accounts, which would allow up to four penalty-free withdrawals per year. Employees who earned less than $150k in 2023 can contribute up to $2,500 per year to this emergency savings account, if their employers choose to set up such an account.

If you have questions on how these provisions might impact you—or whether to take advantage of any new retirement plan features that your employer is offering—please do not hesitate to call or email us any time.