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On December 6, 2023, the committees of jurisdiction – in the Senate the Committee on Health, Education, Labor and Pensions (HELP) and in the House the Ways and Means Committee and the Education and the Workforce Committee – released a “discussion draft” of proposed technical corrections to SECURE 2.0 legislation passed at the end of last year.
The issues addressed – some of which were raised in a May 2023 letter from Congressional leaders to the Department of the Treasury and IRS – are technical and are not intended to change the substance of SECURE 2.0 as passed.
The proposed technical corrections applicable to retirement plans include:
Clarification of timing of SECURE 2.0 increases in the applicable age/required beginning date for required minimum distributions (RMDs).
Clarification that the limit on student loan repayments that qualify for a match is increased (where applicable) by the catchup contribution limit.
Provision that the starter 401(k) plan contribution limit (currently $6,000 indexed for inflation beginning in 2025) will be the same as the IRA limit (already $6,500 in 2023).
Under rules requiring new 401(k) plans to include an automatic enrollment provision, provision that the initial ceiling on automatic contributions would be limited to 10% until 2026 (not, as under current law, 2025).
Clarification that the “regular” limits on startup credits would not apply to the increased startup credits for small plans.
Provision for reporting under Retirement Savings Lost and Found rules by IRAs receiving mandatory distributions (“cashouts”) from covered plans and by deferred annuity contracts receiving distributions from covered plans.
A fix to the catchup contribution glitch – language in SECURE 2.0 which seemed to prohibit catchup contributions by any participant beginning in 2024.
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This is, at this point, only a discussion draft – it’s not unlikely that further technical issues (and, in some cases perhaps, non-technical issues) with SECURE 2.0 will be raised.
We will continue to follow this issue.