Retirement plan law needs some technical corrections, Congress says

The Secure 2.0 Act of 2022 brought big retirement plan changes. But in spots, the wording wasn’t clear, leading to uncertainty among plan sponsors and others.

So, Congress is in the process of making some technical corrections.

After first sending a letter to the Secretary of the Treasury and the Commissioner of the IRS to explain the law’s errors, legislators drafted a bill to provide the necessary fixes.

A so-called discussion draft – i.e., the Secure 2.0 Technical Corrections Act of 2023 – was released by Congress on December 6, 2023.

Here’s a section-by-section recap of what’s been proposed:

Impacting your retirement plan

Section 102: This section deals with the credit for small employer pension plans. In the Secure 2.0 Act, it’s unclear that the credit for employer contributions is in addition to the start-up credit. The bill makes that plain.

Section 107: The 2022 law raised the age at which required minimum distributions (RMDs) from retirement plans must begin. At the time of the law’s passage, the age for RMDs was 72. As instituted by the law, the age increased to 73 for individuals who reached age 72 after the cutoff date of December 31, 2022. That much was clear in the Secure 2.0 Act. Now, details about the subsequent age increase have been reworded to avoid potential confusion. The corrections bill specifies that the age for RMDs will increase to 75 for individuals who reach age 73 after the cutoff date of December 31, 2032.

Section 601: A technical correction was made regarding contributions to SIMPLE IRA and Simplified Employee Pension plans, as provided for in the Secure 2.0 Act. That is, contributions to those plans shouldn’t be taken into account for purposes of the otherwise applicable Roth IRA contribution limit.

Section 603: Catch-up contributions to retirement plans can be made by employees who’ve reached the established age, but the Secure 2.0 Act of 2022 omitted that obvious statement when explaining that catch-up contributions for high-wage earners would need to be made on a Roth basis starting in 2024. The corrections bill sets the record straight. Note: The changes involving catch-up contributions will now take effect in 2026, due to IRS guidance released in 2023.