All Insights

February 08, 2023


SECURE 2.0 has certainly been in the news lately. Countless articles have been written about it’s many (over 90) provisions. Some of these provisions are already in effect, but most come into play in future years.  In this piece, we have selected the provisions that ought to hit your radar as we enter 2023, either because they are already in effect or because now may be a good time to take action in preparation for the time when they do. We will eventually address all of them, of course, but want to be sure we put forth the most timely of them first. 

We will start with provisions immediately applicable to individual taxpayers.

If you turn or will turn age 72 in 2023, you are no longer required to begin Required Minimum Distributions from your qualified retirement plans this year. The age for this required start was increased to 73 starting in 2023 so the requirement now kicks in for you next year. Now, just because you don’t have to, does not mean you may not want to, so be sure you check with your advisory team to determine the most tax efficient way to fund your expenses.
While not immediately applicable, if you are age 63 or below, you should note that the age at which required minimum distributions begin jumps to 75 in 2033.  Anyone around 63 now will face the age 73 rule prior to the age increase to 75.  If you’d like to see the impact to your situation, or determine the most efficient approach to tapping into your retirement dollars, contact your advisory team.

Another change that is effective now is a reduction in the penalties associated with missing a Required Minimum Distribution. The penalty drops from 50% to 25% of the missed amount. Should you correct the miss in a timely fashion, the penalty may be further reduced to 10%. Until now, one could get those penalties waived if efforts to correct were timely. It’s possible the lowered penalty levels will mean fewer complete waivers, so it’s still important to make timely required distributions.

For those facing expenses and the need for early withdrawals, the 10% penalty is now waived in more circumstances.  One new waiver applies to those who are terminally ill. Another applies to those taking certain withdrawals in order to help recover of federally declared disasters.  This hits close to home here in Florida after Hurricane Ian, but given the path and the wrath of that storm, it goes well beyond Florida. 

The new rule associated with disasters occurring after December 27, 2020 allows for the penalty free withdrawal of up to $22,000 if the individual has their principal residence in a federally declared disaster area and has sustained a loss as a result of the disaster. It also allows the amount withdrawn to either be spread out over three tax years or repaid during that same three year period resulting in no taxation of the withdrawn and recontributed amounts.  There are also some new borrowing provisions associated with disaster related losses.  If you would like to discuss the best way to cover your losses incurred, please reach out to your advisory team. Remember, if you took such withdrawals already in order to cover recovery expenses for a disaster back to December of 2020, you may be eligible to take advantage of these provisions.

Another area in which early withdrawal penalties are waived is associated with the payment of premiums for long term care insurance.  Up to $2,500 can be withdrawn to pay for such premiums without penalty.

In an effort to broaden the ability of employees to save for retirement, a new provision allows employers of in-home help (domestic workers) to make contributions to SEP plans for their employees. This is also a great way to reward and retain those workers and differentiate from others not offering such benefits.

Another provision garnering a lot of attention even though it is not applicable until 2024 applies to education funding. Should you find yourselves with excess funds in a 529 plan after the payment of all needed education expenses, the act allows for the rollover of those funds into a Roth IRA, again starting in 2024. Importantly, the 529 plan has to have been in place for at least 15 years. This is worth discussing now as you consider the best way to start early and fund education for those you wish to support in that way.  Some may have hesitated to use the 529 structure out of fear of over funding it – where the funds don’t end up being fully utilized.  There are limitations here, but this is a very nice feature that could encourage more savings for education earlier on. Twos limitations worth mentioning are that the lifetime cap on such rollovers cannot exceed $35,000 and that the normal, annual Roth IRA contribution limits apply.

Now let’s move onto provisions immediately applicable to business owners.
The Act authorizes an enhanced tax credit for certain costs incurred in establishing a new retirement plan. This credit is even applicable to those who choose to participate in a group plan. This is specifically called out as, while the plan itself is not new, the company adding a new plan for their teams and selecting the group plan can treat it as if it were.  There are a number of elements to consider here. The credit applies differently depending on whether you have 50 or fewer employees or 51 to 100 employees. For the smaller of those two, the credit is equal to 100% of the administrative costs (between $500 and $5,000) and there is another credit for 100% of up to $1,000 per employee for employer contributions for the benefit of employees making less that $100,000 in that first plan year. Corresponding deductions are limited, but a credit is more valuable given it is a direct reduction of tax liability.

An additional credit is available for contributions made for military spouses’ accounts.

If you are struggling to get employee participation and believe that offering some small incentives to motivate would help, the Act allows for such de minimus gifts without treating them as income to the recipients.

There are many other provisions to consider, but these are the ones that kick in now and apply most broadly. Your advisory team stands ready to assist in assessing current and future impacts of this sweeping legislation.

Information presented is for educational purposes only, not personalized investment advice. Please be sure to consult with a tax professional before implementing any investment strategy.  Investment Advisory Services offered through Fidelis Capital Partners, LLC a Registered Investment Advisor with the U.S. Securities & Exchange Commission. Registration does not imply a certain level of skill or training. Please refer to our ADV brochure found at for a complete description of services and fees.

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