The Secure Act 2.0 is a proposed bill that could significantly impact retirement savings for both employees and employers. As an HR professional or business owner, staying informed about this legislation and how it could affect your company and your employees is essential.
A few key takeaways about Secure 2.0:
Expanded Access to Retirement Savings
Expanding access to workplace retirement plans would make it easier for employees to save for retirement. Under the bill, all eligible businesses with at least five employees would offer a retirement savings plan, such as a 401(k) or a SIMPLE IRA. This could help millions of workers without access to a retirement plan.
Higher Contribution Limits
The Secure 2.0 Act proposes increasing contribution limits for certain retirement plans, including the 401(k) plan. For instance, the annual employee contribution limit for 401(k) plans would increase from $19,500 to $21,000, and the catch-up contribution limit for workers over age 50 would increase from $6,500 to $7,000, allowing employees to save more for their retirement.
Employers will be encouraged to automatically enroll their employees in retirement plans, as it has been shown to increase participation rates and help workers save more for their retirement. This provision in the Secure 2.0 Act could help millions of Americans who don’t have access to retirement plans and have opted not to enroll in the past for various reasons.
Lifetime Income Options
The Secure 2.0 Act would require retirement plan providers to offer lifetime income options, such as annuities, to plan participants. By providing these options, workers can better prepare for their retirement income and avoid the risk of running out of money during their retirement. Additionally, this provision will provide more options for workers who want guaranteed income for their retirement years.
It would also be easier for workers and plan administrators to access their retirement savings whenever needed. The Secure 2.0 Act would allow penalty-free withdrawals of up to $10,000 from retirement accounts to pay for expenses related to the birth or adoption of a child.
As a business owner or HR manager at a small business, the Secure 2.0 Act could greatly impact your company’s retirement plan. By keeping up with the changes and taking advantage of the new options, you can help your employees save more for retirement and improve their financial security in the future. Don’t hesitate to communicate these changes to your employees and make the most of this legislation offering better retirement benefits for your team.