Dufour Tax Group, LLC

Dufour Tax Group LLC specializes in providing comprehensive strategic tax planning and compliance services to individuals and businesses across the globe. With a broad set of in-house skills and experience, we have the flexibility to work with a multitude of clients – from startups to multimillion

215 Commercial Street Portland, ME, 04101 United States

Dufour Tax Group LLC specializes in providing comprehensive strategic tax planning and compliance services to individuals and business across the globe.

With a broad set of in-house skills and experience, we have the flexibility to work with a multitude of clients - from startups to multi-million dollar enterprise-level companies.

Retirement Plan Changes from the Secure Act 2.0

January 09, 2023  /  Kelly Dufour

At the turn of the calendar from 2022 to 2023, Congress and the Biden administration signed into law the Secure 2.0 Act. This legislation provides near wholesale changes for the structure of retirement plans and contributions for the American taxpayer. With the introduction of this act, the goal was to provide increased access for employees to these plans and expand the utility of these accounts. While dozens of minor changes were enacted into law, the following are the most common/practical for the average taxpayer. To ensure increased participation in retirement plans, employers will now be required to enroll participants upon their becoming eligible as full-time employees. This would begin with a mandatory contribution of 3% with an annual increase of an additional 1%. Importantly, employees may opt out of this plan at any time, but it must be provided for them. Compulsory enrollment begins starting in tax years after December 31st, 2024.  

There will be an increase to the minimum age to start taking RMD’s (Required Minimum Distributions) to age 73 in 2023 and 75 in 2032. Penalties for failing to make this distribution will fall from 50% to 25% effective starting this year. Roth accounts in employer retirement plans are exempt from having required minimum distributions. Those needing to make up ground in their retirement contributions can benefit from a newly introduced catch-up period between the ages of 60-63, with contribution limits of $5,000 for IRA’s and $10,000 for 401k’s. There is an expansion of eligible recipients for QCD’s (Qualified Charitable Contributions) to include charitable remainder trusts, charitable remainder annuity trusts, and charitable gift annuities. All donations to QCD’s count towards the required minimum distribution that an individual must make by certain age requirements.

Small businesses with fewer than 50 employees can also see an increase in the small employer pension plan startup credits. This credit will increase from 50% of cost, $5,000 limit to 100% of cost for the same annual cap. As a bonus, retirement plans can now attach an emergency savings account for savers, up to $2,500 worth of withdrawals. Contiguous with this change, any officially declared federal disaster will allow for someone with a 401k to make a qualified hardship withdrawal. Starting in 2024, employers will be allowed to match student loan payments with contributions to a retirement plan, incentivizing younger employees to save while paying off debt early in their careers.

With the Secure Act 2.0, there are a plethora of additional options available to workers in both how they can contribute towards their retirement and the way in which these funds can be used, especially in times of duress or hardship. It is always best to consult with your tax professional about any possible deductions for contributions and implications from any distributions. Saving early and often is still the best way to provide a well-funded retirement and plan for the future!