Ever since January 2020, we’ve been working with our clients to update their estate plans to comply with the SECURE Act, which significantly impacted how retirement accounts are inherited after the account owner dies. It was complex legislation that led to more questions than answers – and 3 years later, we still don’t have final regulations from the IRS to explain exactly how it works. But that can wait, because in the final days of 2022, Congress and President Biden passed a new act known as “SECURE 2.0,” which serves to supplement the SECURE Act of 2020.

SECURE 2.0 didn’t really clear up the confusion related to the SECURE Act, but it did add some new rules for tax-qualified accounts that you’ll want to know about. Here are a few key changes:

  • The required minimum distribution age is now 73 (effective 1/1/2023). This will increase to age 75 in 2033.
  • If funds are leftover in a 529 account (college savings account), you can now roll the account into a Roth IRA for the account beneficiary (after 15 years).
  • If you are age 60-63, you can make catch-up contributions to your 401(k) of up to $10,000 per year, beginning in 2025. Catch-up contribution limits will also be adjusted for inflation, going forward.
  • For every student loan payment made by an employee, the employer can now make a matching contribution to the employee’s 401(k).
  • To qualify for an ABLE Account (“STABLE” in Ohio), the onset of the beneficiary’s disability must occur prior to age 46, up from the current age 26 rule (effective 2026).
  • Participation in new 401(k) plans will be automatic for employees – effectively changing the old “opt in” structure to a new “opt out” structure, to encourage retirement saving.

There are several other changes coming with SECURE 2.0 that don’t fit into this space. We encourage you to look into these changes and see how they may impact your individual circumstances. If you have any questions regarding the effect of these changes on your estate plan, please don’t hesitate to reach out.