SECURE 2.0 is passed but there’s still some work to do

SECURE 2.0 was signed into law on Dec. 29, 2022, but there is still some work to be done in interpreting more than 90 provisions of the bill.

A panel of legal and tax experts discussed what’s next for SECURE 2.0 during the Employee Benefit Research Institute’s spring policy forum.

Interpreting these provisions “is a multiyear effort because some provisions take place immediately and others don’t take effect until 2024 or later,” said Helen Morrison, deputy benefits and tax counsel with the U.S. Department of the Treasury. Of the 90-plus provisions that need guidance, more than 80 are in the Internal Revenue Code, she said.

One area of SECURE 2.0 in which guidance has not yet been issued is in regard to 401(k) plans for long-term, part-time employees. “Our plan is to get guidance in a proposed piece of regulation,” Morrison said.

SECURE 2.0 raises questions with plan sponsors

Plan sponsors have some questions about SECURE 2.0, said Andy Banducci, senior vice president at The ERISA Industry Committee. One provision in SECURE 2.0 that plan sponsors are questioning is the provision for mandatory catchup contributions for those who made more than $145,000 in the previous year.

“What happens if you made $144,000 one year and and then $146,000 the next and then $144,000 again? What if you hired someone in July but they were on track to make $200,000 a year?”

One of the most popular provisions of SECURE 2.0 is the ability for employers to offer a matching retirement contribution for employees who make qualifying student loan payments. But there are some question about that, Banducci said.

“The statute says employers can use reasonable procedures for employees to claim that benefit. What is a reasonable procedure? What obligation do large plan sponsors have to verify that the employee made the payments? What happens if there’s fraud, if the employee didn’t make those payments? What are the consequences for the plan sponsor?”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.

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