SECURE 2.0 Act - Blog 2.0

March 01, 2023

SECURE 2.0 Act: Blog 2.0

As touched on in our first-ever Financial Plans & Strategies VLOG, the SECURE 2.0 Act has made monumental changes to comprehensive retirement planning as a whole. When thinking of one word to describe these changes, “flexibility” comes to mind. While Sal Perez covered the major changes of the Act, today we will look at some of the less talked about changes, which if utilized correctly, could prove beneficial to retirement plans across the board.

529 RO to Roth IRAs

In the past, parents have struggled with finding the “perfect” balance between saving for retirement and for their children’s educations. Oftentimes, they have feared that they would end up overcontributing to one of the two, leaving the other goal unachievable because allocated funds were inaccessible to make up the difference. To combat this and encourage additional education savings, the SECURE 2.0 Act has changed the law to allow any excess 529 funds to be rolled over into a Roth IRA without penalty or taxing beginning in 2024. These rollovers will be subject to yearly Roth contribution limits and a lifetime amount of $35,000 per beneficiary. Regardless, this change will help ease the worry and stress of balancing the two goals by making monies dedicated to education savings more easily accessible if needed for retirement instead.

Student Loan Payments / Matching contributions

In the event a student is unable to pay the full cost of their education and must take out student loans, the SECURE 2.0 Act helps ease the burden of paying back these loans. Beginning in 2024, employees’ student loan repayments can be taken into account when determining the employer’s matching contribution amounts to their retirement plans. For instance, if an employee contributes $5,000 to their 401(k) and makes payments of $5,000 to their student loans in the same year, their employer can base their 401(k)-matching amount on the total $10,000 that was used for paying down debt and retirement savings. By doing this, the SECURE 2.0 Act is attempting to prevent those with student loans from being penalized when trying to balance student loan repayment and retirement savings.

Part-time employees are now eligible for 401ks – rather than just full time employees

To further encourage saving for retirement and to eliminate barriers to entry, the SECURE 2.0 Act has reduced the hours of work required to qualify for employer retirement plans. Previously to qualify for employer retirement plans, employees must have worked 1,000 hours over the previous year. Moving forward, this requirement has been reduced to include those who have worked 500 hours per year, over the previous two years. This reduction will open the door for part-time workers to save for retirement. (Please check the summary plan description of your employer sponsored plan to learn about the specific plan rules and benefits that your plan provides.)


                To discuss how these the Secure 2.0 Act will affect your plan and to schedule your annual review, please give our office a call at (317) 882-7675.