On December 29, 2022, the President signed into law the Setting Every Community Up for Retirement Enhancement Act of 2022 (SECURE Act 2.0). This bill is an updated version of the original SECURE Act passed in 2019. The revised Act is proposed to address some of the shortcomings of the original bill and to provide additional retirement-related benefits to American citizens.

  • Increase in catch-up contributions indexed with inflation beginning 2025
  • Rollover of 529 plans into Roth IRAs
  • Penalty free withdrawal to meet unforeseeable emergency requirements
  • Autoenrollment in 401(K) plans
  • Bigger tax credit for startup retirement plans
  • New credit for military spouse
  • Improved coverage for part timers

The SECURE 2.0 Act includes several provisions that are designed to encourage Americans to save more for retirement and benefit individuals, small businesses, and changes for conservation easements. This article deep dives into some of these provisions and its implications for taxpayers.

Provisions Benefiting Individuals
  • The Act allows tax-free rollovers from beneficiaries of 529 accounts to Roth IRAs of up to $35,000 in their own name. The caveat is that the 529 account must have been operational for more than 15 years and is limited to the amount contributed to your 529 accounts. What this means is if you were a beneficiary of 529 and decided that college is not for you at 18 and started rolling over the money in a Roth IRA, you will have $35,000 in your account within next 5years.
  • The Act also permits bigger catch-up contributions for older employees starting in 2025where the new catch-up contribution limit for the older workers is either the greater of $10,000 or 150% of the standard catch-up contribution limit. In addition, one penalty-free withdrawal of up to $1,000 is allowed per year for emergency expenses after 2023, and the taxpayer has three years to repay the distribution.
  • The Act also allows retirement plan participants to withdraw up to $10,000(adjusted for inflation) or 50% of their account without incurring the 10%early distribution tax if they have experienced domestic abuse. The withdrawn amount can be repaid within three years, and income taxes refunded if the repayment is made. Additionally, individuals who are terminally ill can now receive distributions without the 10% tax.
  • Starting from December 29, 2025, retirement plans can make penalty-free annual distributions of up to $2,500 for high-quality long-term care insurance premiums. Also, with retroactive implications on disaster after January 25,2021, affected individuals can receive penalty-free distributions of up to$22,000 from retirement plans and IRAs, which can be repaid into a tax-preferred retirement account. Retroactively, those who took out money to buy a home can recontribute, and employers may permit affected individuals to borrow more from their plan or extend their loan repayment period.
  • The Act also allows employers to offer non-highly compensated employees emergency savings accounts linked to their personal account plans at no more than 3% of their salary capped at $2500. This reduces the penalty for failure to take required minimum distributions from qualified retirement plans.
  • For plan years after 2023, the surviving sole spousal designated beneficiary of an employee who dies before RMDs have begun under an employer-qualified retirement plan may elect to be treated as if the surviving spouse were the employee for purposes of the required minimum distribution rules. The Act also allows law enforcement officers, firefighters, paramedics, and emergency medical technicians to exclude from gross income certain service-related disability pension or annuity payments after they reach retirement age. There are also changes to eligibility for tax-exempt ABLE programs, an exemption for telehealth services under high-deductible health plans, and changes to excess contribution rules.

The SECURE Act improves the tax credit for small employer pension plan start-up costs in three ways starting in 2023.

  1. The credit is increased to cover the full amount of creditable plan start-up costs for employers with 50 or fewer employees.
  2. A technical glitch preventing employees who joined multi-employer plans from claiming the credit is fixed with retroactive implications.
  3. Employer contributions for a plan's first five years may qualify for the credit, with varying percentages and caps based on the year.

The credit is reduced for employers with 51 to 100 employees. The credit is not available for high earners, elective deferrals, or contributions to a defined benefit plan.

Additionally, a new tax credit is added for employers with no more than 100 employees earning at least $5,000 for each military spouse who starts participating in an eligible employer defined contribution plan. Highly compensated employees are excluded, and the credit amount is $200 for each participating military spouse plus up to $300 of related employer plan contributions for the first three tax years beginning after December 29, 2022

Finally, for plan years beginning after 2022, sole proprietors who are the only employee of an unincorporated trade or business can make retroactive first-year deferrals to a plan created after the close of the year, with any elective deferral made by the proprietor's original tax return due date treated as made before the end of that first plan year.


The Act requires that for plan years starting after 2024, a plan that allows salary deferrals will not be considered a qualified cash or deferred arrangement or annuity contract, unless it includes an automatic contribution arrangement(EACA) that satisfies certain requirements. Exceptions to this requirement include SIMPLE 401(k) plans, plans established before December 29, 2022,governmental or church plans, plans maintained by an employer in existence for less than three years, or with fewer than 11 employees.

The Act establishes two new types of retirement plan designs for plan years starting after 2023: a new type of section 401(k) plan called a starter 401(k) deferral-only arrangement, which is a cash or deferred arrangement maintained by an eligible employer that automatically satisfies the actual deferral percentage (ADP) nondiscrimination test, and a new type of 403(b) plan called a safe harbor deferral-only plan.

The Act modifies the rules for long-term part-time employees under a 401(k) or403(b) plan subject to ERISA to reduce the service requirement for those employees from three years to two consecutive years, for employees who have worked for the employer at least 500 hours per year and have met the minimum age requirement of 21 by the end of two-year period. This rule comes into effect starting 2024.

The Act also expands the use of self-correction under the IRS (Internal Revenue Service) Employee Plans Compliance Resolution System (EPCRS) and allows custodians to use EPCRS to address various IRA failures, including failures to make required minimum distributions and attempted rollovers by non-spouse beneficiaries from inherited IRAs.

The Act exempts defined contribution plans from intermittent notification requirements for participants who elect not to participate, and who have already received a summary plan description and any other notices related to initial eligibility.

The Act sets the deadline for plan amendments made under the Act or any related IRS or DOL regulation as the end of the first plan year beginning on or after January 1, 2025.

Finally, for tax years beginning after 2023, catch-up contributions under Code Sec.401(k), Code Sec. 403(b), or Code Sec. 457(b) plans are subject to mandatory Roth tax treatment, for those made by participants whose wages for the preceding calendar year exceed $145,000, as annually indexed for inflation.

Change for Conservation Easements

The Act places limits on the tax deductions that partnerships, S corporations, and other pass-through entities can claim for donations of conservation easements. The deduction is disallowed if the amount donated is more than 2.5 times the total amount of each partner/member's investment in the entity. There are some exceptions, such as if the contribution meets a three-year holding period test, the contributing entity is mostly owned by family members, or the contribution is related to a certified historic structure.

The Act also allows taxpayers to correct easement deed language for certain clauses and adjustments, but this provision does not apply to easements involving tax shelters, contributions subject to the pass-through disallowance, docketed Tax Court cases, or cases where penalties have been finalized. This provision applies to contributions made after December 29, 2022.

This information may affect you or your business and may require you to change your retirement plan or how you handle your account and distributions. If you need more information or assistance, you can contact us for help.


Over the next few years, your retirement plan distributions and savings will change. It is imperative that early tax planning and strategies are put into place to maximize the benefits and navigate through changes.

We at Investor Friendly CPA® understand that these provisions can be complex and overwhelming. Through efficient tax planning and strategies catering to your unique situation, we can help you plan better for your retirement goals. IFC can also help you understand the tax ramifications and discuss what changes truly mean to your situation.