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A Look at SECURE and More

Well, this looks familiar: Capitol Hill considering a SECURE Act. But this time around, it’s SECURE 2.0. In a recent webcast, American Retirement Association Retirement Education Counsel Robert M. Richter provided an update regarding the provisions of SECURE 2.0—which include some that would affect 403(b) plans—as well as other legislation of interest to retirement plans, participants and professionals.

H.R. 2954, the Securing a Strong Retirement Act of 2022—a.k.a. SECURE 2.0—received the House nod on March 29, 2022, in an overwhelming 414-5 vote. Following are highlights of the bill’s provisions and Richter’s observations and insights about them. 


The bill sets a requirement for automatic enrollment in new defined contribution deferral plans including 401(k)s, 403(b)s, but not for SIMPLE plans. The default rate would be 3% of pay, escalating to no more than 15%. There would, however, be exceptions:  

  • employers with 10 or fewer employees; 
  • new employees in business for less than three years; 
  • governmental plans; and
  • church plans. 

“It’s a mandate, but it has bipartisan support,” said Richter. He added that there is a “strong chance” the provision will end up in the final form of the bill, but that “we don’t know what the Senate will do.” 


Regarding long-term, part-time (LTPT) employees, Richter said, “People are asking—’where is the IRS guidance?’ The answer is, who knows?,” adding, “The IRS is working on it.” He noted that SECURE 2.0 calls for modifications to how LTPT is defined, and that it provides  500 hours for two (not three) consecutive years be required to meet the definition. In addition, it provides that prior service for vesting would not apply, something about which the American Retirement Association had been advocating. He added that the ARA has been working on fixes, including vesting if an employee who is LTPT becomes a full-time employee, and a top-heavy exemption for certain ADP test safe harbor plans.


Richter noted that SECURE 2.0 calls for new required beginning dates for required minimum distributions (RMDs); it would adjust it to age 73 beginning in 2027 and age 75 beginning in 2033. It also would increase the catch-up contribution limit to $10,000, but $5,000 for SIMPLEs—and individuals ages 62, 63 and 64 would be eligible.

But Richter indicated that that may not all be set in stone. “It’s very expensive from a revenue perspective to increase the required beginning date,” he said. “It is more than likely these will get tinkered with” as the House and Senate start looking at the revenue impact of this provision, he said. 

“These are easily changed,” he said; however, Richter indicated that some kind of change is likely. “There is consensus that the age should be increased beyond age 72,” he said. 

Paper Statements

SECURE 2.0 would impose a mandate that at least one quarterly benefit statement would have to be delivered on paper. This is a provision that “we definitely are not happy about,” Richter said; however, he said, “Still, we’ve made a lot of progress on electronic delivery of required notices.” It is “very unlikely” this is going away, he added. 

Additional Provisions

SECURE 2.0 also would: 

  • Reduce excise tax penalties for RMD failures—it would cut the excise tax penalty in half from 50% to 25%; and it would further reduce the tax penalty to 10%  if the RMD from an IRA is corrected in a timely manner. 
  • Eliminate the disclosure requirement for unenrolled participants.
  • Provide that stock attribution rules do not apply for spouses with separate businesses in community property states; nor would they apply for spouses with separate businesses on account of a minor child.
  • Increase the mandatory cash-out threshold from $5,000 to $7,000.
  • Address student loan matching programs by allowing matching contributions based on student loan repayment. It also would include an ADP testing disaggregation provision.
  • Allow penalty-free withdrawals from retirement accounts for domestic abuse victims—up to the lesser of $10,000 or 50% of the account balance.
  • Allow 403(b) multiple employer plans (MEPs). 
  • Conform the existing hardship distribution rules for 401(k)s to 403(b) plans.

Don’t Hold Your Breath

Richter stressed that the provisions of SECURE 2.0 are preliminary. “We don’t really expect any kind of comprehensive agreement between the committees that’s ready to be included in a larger bill until the end of the year,” said Richter. There are four congressional committees—in the House of Representatives, Ways and Means, and Education and Labor, and in the Senate, Finance and Health, Education, Labor and Pensions—that have a role with the measure. Further complicating matters, Richter said, is that the Senate is not as far along as the House is regarding their idea of what SECURE 2.0 should include.

Beyond SECURE 2.0

While it is important, SECURE 2.0 is not the only pending legislation, nor the only proposal, relevant to retirement plans. Following are highlights of additional matters Richter discussed. 

Protecting America’s Retirement Security Act (H.R. 7310). The House Education and Labor Committee passed the bill on April 5, 2022, in a 29-21 vote, Richter said. He noted that it would require spousal consent for distributions from all plans, and re-enrollment every three years. “Don’t get too worked up about it,” said Richter, adding that he does not expect it to be part of SECURE 2.0. Nonetheless, he said, “don’t expect this issue to die out.”

Portman-Cardin. Richter noted that this legislation includes provisions that call for: 

  • a new stretch match safe harbor; 
  • a Saver’s credit matching contribution;
  • RMDs to not be required for accounts under $100,000 or designated Roth accounts;
  • allow up to a 10% employer contribution to SIMPLE accounts; and 
  • qualified retirement planning services to be a tax-free benefit. 

It’s “anybody’s guess” if these things will be incorporated into SECURE 2.0, Richter said. 

Emergency Savings. The goal, Richter said, is to allow emergency withdrawals from 401(k) or 403(b) plans without tax penalties, and to make it possible to rely on participant statements. He said that two different approaches are being considered: (1) withdrawal from deferral account and (2) a separate sidecar fund. It really amounts to an early distribution, Richter said.

There is a proposal for a new emergency distribution option from retirement plans of up to $1,000 for emergencies, Richter said; the amount would have to be replenished before another distribution or another distribution could not take place for three years.

Regarding the sidecar proposal, Richter said, there would be a limit of $2,500 to annual contributions in the account. Monthly withdrawals would be allowed; they would be after-tax but treated as deferrals for matching purposes. 

Plan Design Expenses. Right now, Richter said, plan design expenses are settlor expenses that can’t be paid from plan assets. However, he noted, there is a proposal that would allow plan design expenses to be paid from plan assets.

RMD Regulations. Richter discussed the proposed RMD regulations issued on Feb. 24, 2022. He said that it is deemed to be a reasonable interpretation of the SECURE Act to apply them now. 

Key takeaways, he said, include:

  • the age of majority is age 21;
  • relief on determining the disability of a minor; and
  • detailed rules on look-thru trusts.

The IRS is soliciting input on the 403(b)-disaggregation rule, Richter added. 

MEPs/PEPs Regulations. Richter noted that the IRS issued proposed regulations on the unified plan rule—a.k.a. the one bad apple rule—on March 25, 2022. It does not apply to open MEPs that are not PEPs, he said. The regs require notices (a series of three 60-day notices instead of 90-day notices that were in 2019 proposal). And although these regulations are in proposed form, they still may be relied upon, Richter said.

W-4P and/or W-4R. The mandatory use of W-4P and/or W-4R is delayed to 2023, Richter said, noting that the W-4R is the new withholding certificate for nonperiodic payments and eligible rollover distributions. 

Notice 2022-6. In this notice, Richter said, the IRS provides guidance on substantially equal periodic payments. It is effective in 2023, but can be used in 2022. The guidance retains three methods—RMD, annuitization or amortization—but imposes a 5% interest rate cap on annuitization or amortization methods. 

Cryptocurrency. The Department of Labor issued Compliance Assistance Release 2022-01 on March 10, 2022, Richter noted. It states that investing in cryptocurrency is not prohibited; however, he said, there is a very strong inference that it’s imprudent and violates fiduciary duties in defined contribution plans with participant-directed investments. The plan fiduciaries responsible for overseeing such investment options or allowing such investments through brokerage windows should expect to be questioned about how they can square their actions with their duties of prudence and loyalty, he said.