Retirement planning is a key factor that every employee will need to consider. Whether you just entered the workforce or are soon to retire, it’s important to be aware of new legislation that has an effect on retirement savings plans.
The SECURE 2.0 Act of 2022 was signed into law on December 29, 2022. The SECURE 2.0 Act includes multiple provisions that touch retirement savings plans, including church plans, in a way intended to build upon the original 2019 SECURE Act. The new provisions provide multiple benefits to both employers and employees. The goal is to get more employers to offer retirement plans to their employees, and more employees to take advantage of retirement savings programs. This will facilitate adoption of retirement plans by employers and improved retirement outcomes for workers.
SECURE 2.0 includes over 90 provisions – a few of the key ones affecting MMBB’s plans include:
Required Minimum Distribution Age – Starting in 2023, the age for required minimum distributions (RMDs) will increase from 72 to 73. The RMD age will increase in 2033 to age 75 for individuals who attain age 74 that year. Individuals who are currently taking RMDs will continue to take a distribution each year based on their age. Individuals who are employees and not owners of 5% or more of their company may defer RMDs until retirement, even if that is after age 73 or 75.
Catch–Up Contributions – Individuals who are age 50 and older are permitted to make an additional catch–up contribution. During 2023, the catch–up contribution for retirement plan participants over age 50 is $7,500. However, starting in 2025, individuals who are 60, 61, 62 or 63 will be permitted to make a larger catch–up contribution to Sec. 401(k), 403(b) or 457 plans. The new amount will be the greater of $10,000 or 150% of the catch–up limit for that year.
Required Minimum Distribution Penalty Reduced – The existing penalty for failing to take a required minimum distribution is 50%. Starting in 2023, this penalty will be reduced to 25%. If the plan participant corrects the failure in a timely manner, the excise tax on the penalty is further reduced to 10%.
In short, Secure 2.0 Act is a big deal and should provide MMBB’s members with important benefits. Contact your MMBB representative to discuss this further and our team is always available to help our members!
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