SECURE 2.0 2024 Key Changes

2. Emergency Relief Options

Facing an unforeseen financial emergency? SECURE 2.0 offers two potential lifelines:

• Penalty-Free Emergency Withdrawals: For the first time, individuals can make a one-time penalty-free withdrawal of up to $1,000 per year from qualified retirement accounts for “unforeseeable or immediate financial needs relating to personal or family emergency expenses.” Remember, repayment within three years is crucial, and subsequent withdrawals are restricted during that period.
• Pension-Linked Emergency Savings Accounts (PLESAs): Employers can now offer PLESAs, funded with post-tax Roth contributions, for similar emergency needs. These accounts offer easy access with automatic enrollment options and are exempt from administrative fees for the first four withdrawals.

3. Relief for Domestic Abuse Victims

Facing financial hardship due to domestic abuse? SECURE 2.0 provides an exception to the 10% early withdrawal penalty. Victims self-certifying abuse can withdraw the lesser of $10,000 (indexed for inflation) or 50% of their account balance, with repayment options and potential tax refunds.

4. Enhanced Catch-Up

Contributions

IRA savers aged 50 and over can rejoice! The annual catch-up contribution limit, previously fixed at $1,000, is now indexed for inflation starting in 2024, offering potentially higher contribution limits in future years.

5. Student Loan Repayment Help

Good news for student loan borrowers! Employers can now make matching contributions to qualified student loan payments after 2023, subject to nondiscrimination rules. This opens up a potential avenue for reducing student loan debt with employer support.

6. Section 529 Rollovers

Have leftover funds in your Section 529 college savings plan? SECURE 2.0 allows tax-free rollovers to Roth IRAs, subject to annual limits and a lifetime cap, after the account has been open for over 15 years. This offers increased flexibility for utilizing these funds beyond education expenses.

7. Increased Mandatory Distribution Threshold

Simplifying administration for employers, SECURE 2.0 increases the mandatory distribution threshold for vested 401(k) benefits of former employees. Employers can now transfer accounts with balances up to $7,000 (previously $5,000) without participant involvement.

8. Hardship Withdrawals for 403(b) Plans

403(b) plans operated by non-profit entities gain more flexibility with SECURE 2.0. Starting in 2024, they can offer hardship distributions under rules similar to 401(k) plans, offering relief for qualified hardship situations.

Remember: This summary provides a general overview. For specific details and how these changes apply to you, consult with your tax advisor or financial professional. By staying informed about SECURE 2.0’s changes, you can make informed decisions to maximize your retirement savings and navigate the evolving landscape effectively.