Secure 2.0: What It Could Mean for Catch-Up Contributions and More

The second iteration of the 2019 Secure Act is underway. Congress wants to make changes to retirement catch-up contributions and more. Here’s what to know.

Rachel Curry - Author

Oct. 11 2022, Published 12:12 p.m. ET

The second iteration of the 2019 Secure Act, dubbed Secure 2.0, is underway. The new version aims to make changes to the retirement income laws through new provisions, including one that could change catch-up contributions.

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While Congress isn't in session until the start of 2023, bipartisan regulators are prioritizing changes to the retirement system. Here’s a rundown of what provisions may become part of the act and how they could change laws surrounding catch-up contributions and more.

Secure 2.0 is in the works — could impact catch-up contributions.

The House of Representatives passed its version of the Secure Act 2.0 back in March with vast bipartisan approval. Now, the Senate must propose its own version. Collectively, the two versions will enable what Congress is calling Secure 2.0.

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While bipartisan support is strong, negotiations will still be lengthy. Congress will have to work out the kinks of the provisions in the retirement system. In the grand scheme of things, the few months remaining until Congress is back in session will pass quickly. Fortunately, talks are underway. “Our understanding is that staff of the committees with jurisdiction have begun discussions,” Paul Richman of the Insured Retirement Institute told reporters.

There are proposed employer-backed emergency funds and enhanced tax credits.

One proposed provision would enable employers to enroll their workers in emergency funds with deposits of up to 3 percent of pay. Accessed monthly with a maximum value of $2,500, excess contributions can be sent straight to a 401(k) plan.

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Alternatively, Congress may allow employees to tap into $1,000 of their 401(k) for emergency purposes without penalty.

Currently, low- and medium-income individual workers can get the saver’s tax credit, up to $1,000 or a percentage of retirement savings contributions. The income cap for this program is $34,000 annually, but Congress may increase that with Secure 2.0.

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What would increased catch-up contribution limits mean?

Employers could be required to automatically enroll workers in 401(k) programs at 3 percent of pay, gradually working up to 10 percent of pay, unless workers explicitly opt out.

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Meanwhile, catch-up contribution limits may increase. Catch-up contributions allow people close to retirement age to add extra money to their retirement savings accounts over the standard limit. For example, 401(k) plans max out at $20,500 per year, but those eligible to make catch-up contributions can add another $6,500 on top of that. Traditional IRA account holders typically capped at $6,000 annually can add another $1,000.

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Increased catch-up contributions would mean workers in their early 60s could pad their retirement with extra cash while they’re still receiving a regular paycheck. It’s possible that near-retirees would be required to make these additional contributions to a Roth IRA account.

Secure 2.0 includes some other proposed changes.

Secure 2.0 may also make part-time workers eligible for 401(k) plans, increase the maximum left-behind 401(k) balance that employers are allowed to automatically cash out after a worker leaves, and increase the required minimum distribution age for retirement accounts.

Ultimately, Secure 2.0 is still very much flexible, but in the works nonetheless. Americans can expect changes on the horizon that make saving for retirement easier.


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