Below is part four of our five-part blog series on the Act. Be sure to bookmark www.bpas.com/blog!
The SECURE 2.0 Act of 2022 (the Act) was signed into law by President Biden on December 29, 2022 as part of the Consolidated Appropriations Act of 2023. Most of the Act’s provisions are intended to enhance coverage and participation in 401(k) and similar-type plans, such as a 403(b), particularly among small businesses that currently do not offer a retirement plan and industries that employ large swaths of part-time workers. There are some other provisions that apply to cash balance defined benefit plans and many others that impact all types of retirement plans.
A Deeper Dive: Additional defined benefit plan-specific provisions
|Eliminate Indexing the PBGC Variable Rate Premium (VRP)||Date of enactment||The VRP is indexed each year by a cost-of-living index. The Act eliminates further indexing. Moreover, the VRP is frozen at the rate of $52 for each $1,000 of unfunded vested benefits.|
|Cash Balance Plan Accrual Rules||Date of enactment||Cash balance plans that use a variable-interest crediting rate may use any reasonable rate not to exceed 6% for purposes of satisfying the accrual rules.|
|Mortality Table Corrections||Valuation dates occurring during or after 2024||IRS mortality tables for determining present values shall be modified to reflect improvements projected by the Social Security Administration.|
|Annual Funding Notice Changes||Plan years beginning in 2024||The Act modifies the ERISA requirements for the required annual funding notice along with some of the language.|
|Section 420 Transfers Extended||Date of enactment||The deadline for transferring excess assets in a defined benefit plan to a 401(h) account has been extended from December 31, 2025 to December 31, 2032.|
Next week, we conclude our SECURE Act 2.0 blog series with part five and highlight provisions that simplify and clarify certain rules and administrative concerns.
The SECURE Act 2.0: What You Need to Know
Join BPAS for a free webinar Wednesday, March 1st at 12:00 pm EST. With more than 90 new provisions, understanding the SECURE Act 2.0 may seem daunting–this webinar will summarize everything you need to know about how the Act will affect you and your employees now and into the future. Register here!
Questions or concerns about the new legislation? Contact your financial advisor or BPAS Participant Services.