SECURE Act 2.0: Congress Delivers Retirement Plan Legislation and Holiday Cheer as Part of Year-End Spending Bill

December 27, 2022

After months of on-again off-again consideration of competing bills, US Congress capitalized on bipartisan support for retirement plan legislation to deliver the SECURE 2.0 Act of 2022 (SECURE Act 2.0) as part of the year-end omnibus spending bill, the Consolidated Appropriations Act of 2023 (the CAA).

The Setting Every Community Up for Retirement Act of 2019 (SECURE Act 1.0), enacted at the end of 2019, included a wide range of provisions that were intended to expand access to retirement plans and make saving for retirement easier for both employers and employees. When it was enacted, SECURE Act 1.0 was widely hailed as the most significant piece of retirement plan legislation in more than 10 years. Barely three years later, SECURE Act 2.0 continues this push by not only expanding some of the original SECURE Act 1.0 themes and concepts, but also adding a host of new ones. SECURE Act 2.0 is not final until the CAA is signed into law, but it is widely anticipated that President Joseph Biden will sign it soon.

There is nothing that employers or retirement plan sponsors need to do by year's end in response to SECURE Act 2.0. A brief listing of significant provisions in SECURE Act 2.0 is set forth below. Morgan Lewis will issue more detailed analyses of SECURE Act 2.0 in a series of releases in the coming weeks.


  • Required Automatic Enrollment and Escalation Provisions for New Plans: Any 401(k) or 403(b) plan that is established after the date of enactment of SECURE Act 2.0 must, for plan years beginning after December 31, 2024, contain an automatic enrollment provision that automatically enrolls employees (unless the employee opts out) and an automatic escalation provision that automatically escalates participants’ deferral percentage (again, unless the employee opts out). More specifically, employees must be automatically enrolled at a contribution percentage of at least 3%, but not more than 10%, and their contribution percentage must automatically increase by 1% on the first day of each plan year following completion of a year of service until the contribution is at least 10%, but no more than 15%. Exceptions to these general rules apply to governmental and church plans and for plans sponsored by new and small businesses. Employers that join an existing multiple employer plan are subject to these requirements as if they had established a new plan.
  • Saver's Matching Contribution: Effective for tax years beginning after December 31, 2026, lower-income retirement savers will be eligible to receive a government-funded matching contribution to their individual retirement account (IRA) or retirement plan in an amount up to 50% of their contributions (phased out as the individual’s income increases), capped at a maximum of $2,000 and reduced by certain distributions that are taken by the individual.
  • Increase in Catch-Up Contributions: Employees who are age 50 or older currently are eligible to make additional "catch-up" contributions to eligible retirement plans up to certain inflation-adjusted limits ($6,500 for 2022). Effective for tax years beginning after December 31, 2024, these catch-up contributions will be increased (to the greater of $10,000 or 150% of the "regular" age 50 catch up contribution amount) for employees who are reach ages 60, 61, 62, or 63 during the year.
  • "Rothification" of Catch-Up Contributions: In an apparent attempt to raise tax revenue to offset the costs (i.e., the lost tax revenue) of other provisions, SECURE Act 2.0 provides for certain contributions to be made on a Roth (i.e., after-tax) basis. Effective for tax years beginning after 2023, catch-up contributions to 401(k), 403(b), and governmental 457(b) plans by employees whose wages exceed $145,000 (as indexed) must be made on a Roth basis. This Roth treatment of catch-up contributions is mandatory for any plan that makes catch-up contributions available.
  • Optional "Rothification" Employer Matching and Nonelective Contributions: Similar to the preceding point, as a revenue-raiser, effective for contributions made after the date of enactment of SECURE Act 2.0, plans may offer employees the ability to elect for some or all of the matching or nonelective employer contributions made to them under the plan to be characterized as Roth contributions, but only if the contributions are fully vested at the time they are made.
  • Matching Contributions for Student Loan Payments: Effective for plan years beginning after 2023, 401(k), SIMPLE IRA, 403(b), and governmental 457(b) plan sponsors are able to make matching contributions to employees for certain "qualified student loan payments" made by the employees for higher education expenses and to have these matching contributions treated as regular matching contributions for discrimination testing purposes. This provision is intended to make it easier for employers to provide employer-matching contributions to employees who are paying off student loans in lieu of making retirement plan contributions.
  • Ability to Offer De Minimis Incentives to Improve Retirement Plan Participation: Currently, employees are prohibited from receiving incentives or other benefits that are contingent on the employee making contributions to a retirement plan (other than matching contributions). Effective for plan years after the date of enactment, SECURE Act 2.0 loosens this restriction and allows employers to provide “de minimis financial incentives” (e.g., gift cards of a modest amount) that are not paid for with plan assets. The statute does not include any guidance on what constitutes a “de minimis financial incentive,” which presumably will be left to guidance from the Internal Revenue Service (IRS).
  • Further Improving Coverage for Long-Service Part-Time Employees: SECURE Act 1.0 required that employees who had at least 500 hours of service in each of three consecutive years be permitted to make elective deferrals to an employer's 401(k) plan (but with no requirement for an employer to provide matching or other employer contributions). Effective for plan years beginning after December 31, 2024, SECURE Act 2.0 shortens this eligibility requirement from three to two years.
  • Emergency Savings Accounts Linked to Retirement Plans: Effective for plan years beginning after December 31, 2023, SECURE Act 2.0 allows sponsors of individual account plans (such as 401(k) or 403(b) plans) to create “emergency savings accounts” that permit non-highly compensated employees to make Roth after-tax contributions to a special savings account within the retirement plan. Balances in an emergency savings account must be eligible for distribution at least once per month, and contributions cannot be made to an emergency savings account that would cause the balance to exceed $2,500 (adjusted for inflation after 2024), or a lesser amount established by the plan sponsor. Importantly, an employee’s contributions to the emergency savings account must be eligible for matching contributions at the same matching rate established under the plan for elective deferrals (but the matching contributions are not made to the emergency savings account).
  • Tax Credits for Small Employers: Under current law, employers with less than 100 employees that adopt a new retirement plan may qualify for an annual tax credit for up to three years equal to the lesser of (1) 50% of the administrative cost of establishing the plan, or (2) $5,000. Effective for 2023, SECURE Act 2.0 increases the percentage from 50% to 100% for employers with 50 or fewer employees and establishes a generous new tax credit for contributions made by small employers to a newly established retirement plan (other than a defined benefit plan). The new tax credit will be a set percentage of the amount contributed by the employer for employees up to a per-employee cap of $1,000 (but contributions to employees with compensation in excess of $100,000, as indexed, are not taken into account). The set percentage is 100% for the year the plan is established and the following year, 75% for the third year, 50% for the fourth year, 25% for the fifth year, and 0% thereafter. The full amount of the new tax credit would be available to employers with 50 or fewer employees but phases out for employers with 51 to 100 employees.


  • Increase in Required Beginning Date: Continuing a trend started in SECURE Act 1.0, the required beginning date age for commencing retirement plan distributions increases to age 73 starting on January 1, 2023, and then further increases to age 75 starting on January 1, 2033.
  • Elimination of Pre-Death Required Minimum Distributions for Roth Amounts: Effective for tax years beginning after December 31, 2023, and conforming the required minimum distribution rules for Roth IRAs, pre-death required minimum distributions are not required for Roth amounts held in an employer retirement plan.
  • Withdrawals for Certain Emergency Expenses: Effective for withdrawals made after December 31, 2023, certain withdrawals or distributions from certain eligible retirement plans (e.g., 401(k) and 403(b) plans) for emergency expenses will not be subject to the 10% tax on early distributions. Only one emergency expense withdrawal of up to a maximum of $1,000 is permissible each year. The participant must be given the opportunity to repay the withdrawal within the following three years. Additional emergency expense withdrawals within the three-year period are limited if repayment has not been made or additional contributions have not been made equal to or exceeding the repayment amount.
  • Increase in Small Benefit Cashout Limit and Offer of Automatic Portability Provision: Under current law, a retirement plan benefit of $5,000 or less may be automatically cashed out and transferred to an IRA with a default IRA provider unless the participant elects otherwise. Effective for distributions after December 31, 2023, SECURE Act 2.0 increases this automatic cashout limit to $7,000. In addition, SECURE Act 2.0 paves the way for retirement plans and recordkeepers to offer automatic portability provisions for amounts transferred to a default IRA. These automatic portability provisions will enable amounts transferred to the default IRA to be automatically transferred into the retirement plan of the employee's new employer without the employee needing to take any action.
  • Remove Required Minimum Distribution Rule Barriers to Lifetime Income: Effective for calendar years ending after the date of enactment, SECURE Act 2.0 modifies the required minimum distribution rules to eliminate perceived barriers to the availability of certain common lifetime annuity features (e.g., period certain guarantees, guaranteed annual increases of modest amount, etc.) for commercial annuities that are issued in connection with any eligible retirement plan.
  • Expand Availability of Qualified Longevity Annuity Contracts (QLACs): Under current law, defined contribution plans and IRAs can offer participants the ability to use up to the lesser of 25% of their account or $145,000 to purchase QLACs that begin payment at or near the end of the participant's life expectancy and that are intended to protect against a participant outliving their retirement assets. For QLACs purchased after the date of enactment, SECURE Act 2.0 repeals the 25% limit, increases the dollar amount to $200,000 (as indexed), and permits QLACs to include certain other features.
  • Reliance on Employee Certification of Hardship: Effective for plan years after the date of enactment of SECURE Act 2.0, absent actual knowledge to the contrary, plans will be permitted to rely on a participant’s self-certification for deemed hardship events enumerated in the hardship regulations that the participant is eligible for a hardship withdrawal from a 401(k) or 403(b) plan or an unforeseeable emergency distribution from a governmental 457(b) plan. This simplifies the current structure under which the employer can rely on a participant’s self-certification as to the amount necessary to address the hardship but not their certification regarding the existence of the deemed hardship event itself.
  • Penalty-Free Withdrawals from Retirement Plans for Cases of Domestic Abuse: Effective for distributions made after December 31, 2023, plans can permit participants who self-certify that they have experienced domestic abuse within the past year to withdraw a portion of their retirement plan account (the lesser of $10,000 as indexed for inflation or 50% of the participant's account). A withdrawal made pursuant to this provision is not subject to the 10% tax on early distributions and the participant has the opportunity to repay the withdrawn amount over a three-year period.
  • Penalty-Free Withdrawals for Individuals with Terminal Illnesses: Effective for distributions after the date of enactment, retirement plan distributions made to a participant who is otherwise eligible for a distribution and is "terminally ill" (as certified by a physician) will not be subject to the 10% tax on early distributions. The distribution can be repaid under rules similar to those for qualified birth or adoption withdrawals.
  • Permanent Rules for Relief in Connection with Qualified Federal Disasters: Under past laws, special ad hoc exceptions were made to provide retirement plan relief in connection with certain federally declared disasters. Effective for disasters occurring on or after January 26, 2021, SECURE Act 2.0 establishes permanent rules for such relief, permitting up to $22,000 in "qualified disaster recovery distributions" that are not subject to the 10% tax on early distributions. Qualified disaster recovery distributions are eligible to be taken into income over three years and can be repaid to the plan. In addition, for individuals who experience a qualified disaster, the maximum plan loan limit can be increased up to $100,000 (or 100% of the participant’s account balance, if less) and a one-year extension of any loan repayment period can be provided.
  • Participant Disclosure Requirements for Lump Sum Distribution Windows: SECURE Act 2.0 will require specialized notices (a model will be issued) to participants being offered a temporary lump sum distribution option under a pension plan. The special notice must be provided at least 90 days before the first date the participants could elect a lump sum. SECURE Act 2.0 also will require plans to provide notification of the lump sum offering to the Pension Benefit Guaranty Corporation and the Department of Labor (DOL). This provision will not be effective until the DOL issues final regulations.
  • Requirement to Periodically Provide Paper Benefit Statements: Effective for plan years beginning after December 31, 2025, a paper benefit statement must be furnished once per year for an individual account plan and at least every three calendar years for a defined benefit plan, unless the plan follows the DOL's electronic delivery rules or the participant or beneficiary requests that the statements be provided electronically.


  • 403(b) Plan MEPs and PEPs: Starting in 2023, 403(b) plans will be able to participate in MEPs and PEPs. 403(b) MEPs and PEPs will be subject to registration and reporting requirements similar to those that apply to traditional MEPs and PEPs. Additionally, the statutory exception to the unified plan rule introduced in SECURE Act 1.0 is extended to cover eligible 403(b) MEPs and PEPs.
  • Contribution Collection Procedures for PEPs: SECURE Act 1.0 provides that PEP trustees are responsible for collecting contributions to PEPs and implementing written contribution collection procedures that are reasonable, diligent, and systematic. Beginning in 2023, SECURE Act 2.0 allows this responsibility to be assigned to the trustee or any other named fiduciary of the PEP (other than a participating employer).
  • Retirement Plan Startup Costs Tax Credit: SECURE Act 1.0 introduced tax credits for small employers to offset the startup costs of establishing a new retirement plan (discussed above). As this credit becomes available based on when the new plan is first effective, there was some confusion about whether (and how) the credit would apply where otherwise eligible employers chose to participate in MEPs or PEPs (a new MEP or PEP is not established each time a participating employer joins the MEP or PEP). SECURE Act 2.0 resolves this issue and clarifies that eligibility for the credit is based on the first year in which the MEP or PEP becomes effective with respect to the eligible employer. This change is effective retroactive to the effective date of SECURE Act 1.0.
  • GoP Audit Requirement: SECURE Act 1.0 allows single employer plans that meet certain conditions to participate in GoPs—sometimes called defined contribution groups (DCGs)—and file a single consolidated Form 5500. Since the passage of SECURE Act 1.0, there has been some debate over whether a "large plan" with 100 or more participants participating in the GoP must receive a separate audit, whether a "small plan" with less than 100 participants that participates in a GoP alongside one or more large plan must receive a separate audit, and whether each audit report is required to be included with the consolidated Form 5500 filing. Effective as of the date of enactment, SECURE Act 2.0 clarifies that only those plans that would have been subject to the audit requirement absent their participation in a GoP are subject to the audit requirement while participating in the GoP.


  • Recovery of Overpayments: Effective as of the date of enactment, SECURE Act 2.0 gives retirement plan fiduciaries statutory discretion over whether to seek recoupment of overpayments from participants. However, unlike current IRS correction procedures, SECURE Act 2.0 does not require the plan sponsor to make up the overpayments under certain circumstances. In addition, if a plan seeks recovery of overpayments, certain restrictions and protections will apply (e.g., no recoupment of interest from participants, limits recoupment from future benefit payments in excess of 10% of the payments, participants must be notified within three years of the overpayment except in cases of fraud or misrepresentation, etc.). SECURE Act 2.0 also allows overpayments that have been rolled over and not repaid to continue to be treated as eligible rollover distributions.
  • Reduction in Excise Taxes for Required Minimum Distribution Failure: Effective for tax years after enactment, SECURE Act 2.0 reduces the excise tax for required minimum distribution failures from 50% to 25% (and potentially as low as 10% if the failure to take a required minimum distribution is corrected in a timely manner). The statute does not affect existing provisions that allow the plan administrator or the participant to apply for a waiver of the penalty.
  • Expansion of Employee Plans Compliance Resolution System (EPCRS): Effective upon enactment, SECURE Act 2.0 expands the ability of plans to self-correct certain failures through EPCRS (the Internal Revenue Service's correction program), including plan loan failures and any "eligible inadvertent failure" (failure that occurs in spite of the plan having practices and procedures to comply with the applicable Internal Revenue Code requirement violated).
  • Establishment of Retirement Savings Lost and Found: SECURE Act 2.0 directs the establishment of an online searchable database, within two years of enactment, that will allow a participant or beneficiary to search for contact information for plan administrators of plans in which the participant or beneficiary may have a benefit. Plans will be required to share information with the DOL to be included in the database.
  • Streamline Notice Requirements to Unenrolled Employees: Effective for plan years beginning after December 31, 2022, plans will no longer need to provide certain notices to employees who have not elected to enroll. Instead, plans would only be required to provide an annual notice reminding the employee of their eligibility to participate in the plan and any deadlines to enroll.
  • Elimination of Barriers for 403(b) Plans to Utilize Certain Investment Vehicles: Under current law, 403(b) plan investment vehicles are limited to annuity contracts and publicly traded mutual funds. Effective after the date of enactment of SECURE Act 2.0, 403(b) plans would eliminate these barriers and permit 403(b) plans to invest in collective investment trusts, which often are available at a lower cost. However, corresponding changes in applicable securities laws were not included in SECURE Act 2.0, which means that further legislative action is likely necessary before 403(b) plans can take advantage of this SECURE Act 2.0 change.


As noted above, there is nothing that employers or retirement plan sponsors need to do by year end to comply with SECURE Act 2.0. In particular, plan amendments to comply with SECURE Act 2.0 generally do not need to be made until the end of the 2025 plan year (or the end of the of the 2027 plan for certain governmental plans and collectively bargained plans).

SECURE Act 2.0 also extends the amendment deadlines for other recent legislation—SECURE Act 1.0., the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and the Taxpayer Certainty and Disaster Relief Act of 2020—to conform to the SECURE Act. 2.0 amendment deadlines.

Morgan Lewis will be providing a more detailed analysis of SECURE Act 2.0 in the coming weeks. In the meantime, if you have any questions concerning SECURE Act 2.0, please reach out to your Morgan Lewis contact.


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