An impactful piece of legislation with profound implications for the world of investing and financial planning was officially enacted on December 29th, 2022. Known as the SECURE 2.0 Act of 2022, this comprehensive law aims to stimulate the availability of retirement plans offered by employers and encourage greater participation in saving for the future among employees. In the coming weeks, we will delve into various updates introduced by this bill.
Let's commence by exploring the noteworthy enhancements to qualified retirement plans. As of January 1, 2025, newly established 401(k) plans after December 29, 2022, will be mandated to automatically enroll eligible participants. The initial enrollment contribution must range from 3% to 10% of the employee's wages, and each subsequent year, the contribution must increase by 1% until it reaches at least 10%, with a maximum of 15%. Exceptions to this provision apply to small businesses (with 10 or fewer employees), recently established businesses (operating for 3 years or less), churches, and government entities.
Another notable update pertains to the eligibility of part-time employees. Presently, an employee must accumulate at least 1,000 hours of service in a 12-month period or 500 hours of service over three consecutive years to become eligible for their employer's retirement plan. The new law reduces the eligibility requirement to two years.If you are currently enrolled in your employer's retirement plan, it is crucial to comprehend how these recent changes may impact your retirement savings strategy. We encourage you to reach out to your benefits manager or contact us for further guidance. Stay tuned for more insights on the additional implications of the SECURE 2.0 Act and please do not hesitate to contact us if you have any inquiries or require further assistance.