Take-Away: The SECURE Act 2.0 is now directly before Congress in its 2023 federal budget negotiations. The Act could become law in a day or two, depending on whether some compromise on the federal budget is reached (and some members stop the grandstanding in front of their constituents.)

SECURE Act 2.0: Some of the key employee benefit/retirement provisions of the Omnibus Budget Bill that is currently being debated in Congress (with very few concerns over the retirement provision since there is bipartisan support for these retirement plan provision) are succinctly summarized below:

RBD: The required beginning date (RBD) at which required minimum distributions (RMDs) must be taken, increases over the next 9 or 10 years going from age 72 to age 75.

Catch-up Contributions: A maximum catch-up retirement plan contribution of $10,000 would be available to individuals who are between the ages 60 to 63.

Student Loan Repayments: A plan participant who makes a payment on an outstanding student loan can have their employer make a matching contribution to a retirement plan account equal to the amount of their loan repayment amount. This matching contribution amount could be capped at $10,000.

QLAC: A qualified longevity annuity contract (QLAC) held in a qualified plan account would have its limit increased from the current 25% not-to-exceed $100,000 amount, to a maximum amount of $200,000.

50% Excise Tax: The 50% excise tax imposed on an account owner’s failure to take a required minimum distribution (RMD) amount would be reduced to 25%.

CRAT: A retirement account owner would be eligible to fund a charitable remainder annuity trust (CRAT)  with up to $50,000 and not have that contribution amount be treated as a taxable distribution from the owner’s retirement account.

Birth and Adoption Expenses: A distribution from an IRA which is used to pay birth and adoption expenses would not trigger the 10% early distribution excise tax (under the age of 59 ½) but such a distribution would still be taxed as ordinary income.

Domestic Violence: A victim of domestic violence would be eligible to take a distribution of up to $10,000 from an IRA without having to pay the 10% early distribution excise tax, but such a distribution would still be taxed as ordinary income.

Prohibited Transaction: If a prohibited transaction occurs with an IRA, rather than have the entire IRA cease to be qualified for income tax deferral, only the amount that triggered the prohibited transaction would be disqualified from tax deferral.

Roth 401(k): Amounts held in a Roth 401(k) qualified plan will not be subject to the required minimum distribution (RMD) rules.

Surviving Spouses: A surviving spouse of a deceased plan participant will be eligible to be treated as a ‘continuing’ plan participant.

Excess Contribution Penalty: The excise tax imposed on excess contributions to a retirement plan account or IRA would be eliminated if the excess contribution is ‘cured’ within a reasonable period.

Special Needs Trusts:  A new rule would deal with retirement plan contributions to a qualifying special needs trust (SNT) to deal with the Medicaid pay-back requirement associated with  the special needs trust.

Terminal Illness: If a retirement plan owner is terminally ill and distributions are made from their retirement plan account, the 10% early distribution excise tax would be waived.

This will be updated when/if Congress gets around to passing the Omnibus Budget Bill.