Akin Investments looks at the Secure Act 2.0 Enhancements to Americans' retirement security.
Expanding Coverage and Increasing Retirement Savings
One of the main reasons many Americans reach retirement age with little or no savings is that too few workers are offered an opportunity to save for retirement through their employers.
However, even for those employees who are offered a retirement plan at work, many do not participate. But automatic enrollment in 401(k) plans – providing for people to participate in the plan unless they take the initiative to opt out – significantly increases participation.
THE FULL TEXT OF THE SUMMARY OF THE SECURE 2.0 ACT:
HIGHLIGHTS OF THE ACT
A provision that increases the tax credit for small employer pension plan startup costs from 50% to 100% for the first three years and creates a new tax credit of up to $1,000 per employee for employer contributions to new plans;
Mandatory automatic enrollment of employees in 401(k) and 403(b) plans once they become eligible;
An increase in the age at which RMDs are to begin, to 73 in 2023 and 75 in 2033;
A provision that allows student loan payments by employees to be treated as elective deferrals for purposes of employer matching contributions;
Creation of the Saver’s Match, which involves a federal matching contribution into a taxpayer’s IRA or retirement plan account;
Waiver of the 10% tax on early distributions for emergency personal expenses, employees with a terminal illness, in cases of domestic abuse, and instances in which an employee is impacted by a qualified federally declared disaster;
Creation of a Starter 401(k) or a safe harbor 403(b) for employers with no retirement plans;
More generous rules to allow a greater number of part-time workers to participate in employer-provided retirement plans;
A provision that allows employers to offer pension-linked emergency savings accounts to their employees; and
Provisions that allow employees and employers to make larger contributions to Simple plans.
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