All the New Secure 2.0 and RILA Deadlines You Need to Know
The IRS, SEC and DOL now have dozens of new RMD, IRA, annuity and defined contribution plan projects to start.
The enormous new spending bill Congress has sent President Joe Biden could create a mountain of financial services law implementation work for federal agencies over the next 10 years.
The heart of the new Consolidated Appropriations Act, 2023 (CAA, 2023) consists of appropriations provisions needed to keep the federal government running. At press time, the White House had not yet announced the signing of the bill or arrangements for a signing ceremony, but the president had expressed strong support for the bill and indicated that he would sign it.
The House has posted a PDF file version of H.R. 2617, the bill that carried CAA 2023 through Congress, which clocks in at 4,126 pages long.
In addition to the meat-and-potatoes spending provisions, the package includes many general provisions that could have an enormous impact on your clients, your firm and your own personal life, such as sections dealing with ransomware attacks, pregnancy-related discrimination, efforts to improve pandemic preparedness and a fund set up to reward whistleblowers who tell law enforcement agencies about the efforts of terrorists and druglords to launder money.
CAA, 2023 also contains hundreds of pages of laws that apply directly to individual retirement accounts, defined benefit pension plans, defined contribution retirement plans, annuities, long-term care insurance policies, and other retirement savings arrangements, such as benefits for the survivors of U.S. Tax Court judges who are assassinated.
Most of the financial services provisions are in the Secure 2.0 section, in Division T. Others are in the registered index-linked annuity, or RILA, registration rule provision, in Division AA.
We pored through the PDF and found many dozens of implementation deadlines. Those deadlines will affect work lists at the Internal Revenue Service, the U.S. Department of Labor the U.S. Securities and Exchange Commission, the National Association of Insurance Commissioners, the National Council of Insurance Legislators, and state legislatures and state regulatory agencies.
The deadlines will also affect what organizations like the Securities Industry and Financial Markets Association, the Financial Planning Association, the Insured Retirement Institute, National Association of Insurance and Financial Advisors, Finseca will be asking members to talk about during fly-ins into D.C. and visits in lawmakers’ own jurisdictions.
One sign of how long implementation work could last: Federal and state agencies are still fleshing out the investment advice standards provision in the Employee Retirement Income Security Act of 1974, which was enacted 48 years ago.
Here’s a look at 50 of the Secure 2.0 and RILA registration parity deadlines that affect civilians, to provide a sense of what’s in there. In some cases, when we arranged the list, we assumed for the sake of year calculations that the official enactment date would be in 2022, and that few plans have plan years beginning from Dec. 28 through Dec. 31.
2014
1. Qualifying Longevity Contracts
Secure 2.0, Section 202
This section increases the amount of retirement plan assets an individual can move into a QLAC, or a lifetime income annuity with a benefits stream that can start far in the future and that qualifies for special tax treatment, from $125,000 to $200,000, and could serve as a vehicle for annuitizing a client’s retirement plan assets.
The section would also adjust the new $200,000 limit for inflation, and it would eliminate a rule that now caps QLAC premiums at 25% of a retirement plan participant’s plan asset total.
QLAC promoters see the structure of the product as a good way to minimize the cost of providing protection against longevity risk for retirees who live far past age 85.
Effective: Some provisions would apply to QLACs purchased or received in an exchange on or after July 2, 2014. Others would take effect on the date of enactment.
2022
2. Employer Plans, Matching Contributions & Roth Treatment
Secure 2.0, Section 604
This section would let an employer with a 401(k) plan, a 403(b) plan or a 457 plan offer employees a chance to have the employer contributions designated as Roth contributions. That means the contributions would not reduce the employees’ current taxable income.
Effective for: Contributions made after the date of enactment.
3. Early Distributions and Individuals With a Terminal Illness
Secure 2.0, Section 326
This section lets clients with less than 84 months to live take early distributions from qualified plans without paying the 10% excise tax on early distributions.
Effective: On the enactment date.
4. Excise Taxes for Excess IRA Contributions
Secure 2.0, Section 313
This section changes the rules governing when individuals have to pay extra excise taxes when they put too much cash into their IRAs.
Effective: On the date of enactment.
5. Required Minimum Distributions and Life Annuities
Secure 2.0, Section 201
This section would let the issuer of a lifetime income annuity provide up to 5% in annual inflation protection, a partial return of premiums after death, and other features to increase the contracts’ ability to get your clients’ attention.
Effective for: Calendar years ending on or after the date of enactment.
6. Simplification of Retirement Plan Overpayments
Secure 2.0, Section 301
This section would update the rules that apply when an employer pays the beneficiaries too much, and especially when the plan tries to get the excess payments back.
Effective: On the date of enactment.
7. Defined Benefit Pension Plan Mortality Tables
Secure 2.0, Section 335
This section calls for the IRS to modify defined pension benefits value calculations to eliminate assumptions that future mortality will improve by more than 0.78% in a future year. This provision reflects “material changes in the overall rate of improvement projected by the Social Security Administration,” according to the bill text.
Effective: On the date of enactment.
8 Tax Court Retirement Provisions
Secure 2.0, Section 701
This section includes several changes in pension annuity provisions for U.S. Tax Court judges, including provisions for the pensions of the surviving spouses and dependent children of judges who have been assassinated.
Effective: On the date of enactment.
2023
9. Retroactive First-Year Elective Deferrals for Sole Proprietors
Secure 2.0, Section 317
This section would give self-employed clients without employees extra time to put cash into new retirement savings arrangements.
Effective for: Plan years beginning after the date of enactment.
10. A Simplified Employee Pension Contribution “Revenue Raiser”
Secure 2.0, Section 601
This section would let an employer with a simplified employer pension plan offer a Roth account option, funded with employee contributions that do not reduce the employee’s taxable income.
Effective for: Taxable years beginning after Dec. 31, 2022.
11. Increase in Age for the Beginning Date for RMDs
Secure 2.0, Section 107
This section would phase in an increase in the starting age for required minimum distributions, or RMDs, from 72 to 75.
Effective: After Dec. 31, 2022. The RMD age would go up to 73 for individuals turning 72 after that date and before Jan. 1, 2033. The RMD age would increase to 75 for individuals turning 74 after Dec. 31, 2032.
12. Reduction in the Excise Tax on Failures to Take RMDs
Secure 2.0, Section 302
This section would reduce the excise tax to 25%, from 50%.
Effective for: Taxable years beginning after the date of enactment.
13. Distributions From IRAs to Charitable Giving Arrangements
Secure 2.0, Section 307
This section would affect clients who want to move up to $50,000 in individual retirement arrangement assets, one time, into split-interest charitable giving vehicles such as charitable gift annuities or charitable remainder annuity trusts.
Effective for: Distributions made after the date of enactment.
14. Inflation Impact Report
Secure 2.0, Section 347
This section would require the U.S. Labor secretary to prepare a study on the effects of inflation on retirement savings.
Effective: 90 days after the date of enactment, or sometime around April.
15. Retirement Plan Enrollment Incentives
Secure 2.0, Section 113
This section would let employers use “small, immediate financial incentives” to persuade employees to contribute to retirement plans.
Effective for: The plan year beginning after the date of enactment.
16. Administration for “Unenrolled” Plan Participants
Secure 2.0, Section 320
This section would ease notice requirements and other retirement plan administration requirements related to “unenrolled participants,” who, apparently, include former plan participants and other employees could participate in the plan but are not in the plan.
Effective for: The plan year beginning after Dec. 31, 2022.
17. Increased Credit for Small Employers That Start Retirement Plans
Secure 2.0, Section 102
This section would let employers with fewer than 50 employees get credit for up to 100% of the early administrative costs, up from 50% today.
Effective for: Taxable years beginning after Dec. 31, 2022.
18. Multiple Employer 403(b) Plans
Secure 2.0, Section 106
This section would make it clear that nonprofit employers with 403(b) plans can team up to offer the same kinds of multiple employer plans that 401(k) plan sponsors can offer.
Effective for: Plan years beginning after Dec. 31, 2022.
19. Pension Plan Lump-Sum Buyout Notice Requirements
Secure 2.0, Section 342
This section would require defined benefit pension plan sponsors offering the participants lump-sum buyouts to show how the value of the pension benefits stream promised looks when compared with retail individual annuities.
Effective: At least one year after the enactment date.
20. Pooled Employer Plans Modification
Secure 2.0, Section 105
This section would let employers that join together to offer a retirement plan name anyone other than an employer in the plan to be the entity responsible for collecting member employer contributions.
Effective for: Plan years beginning after Dec. 31, 2022.
2024
21. Registered Index-Linked Annuity Registration Parity
Division AA, Financial Services Matters, Registration for Index-Linked Annuities
This section, which is not part of Secure 2.0, would make it easier for life insurers to add new RILA contracts by requiring the SEC to develop a simpler RILA registration process.
Effective: 18 months after the date of enactment, or mid-2024.
22. A Catch-Up Contribution “Revenue Raiser”
Secure 2.0, Section 603
This section would require some older retirement savers to make catch-up contributions using Roth account options, meaning that the contributions would not reduce the savers’ current taxable income.
Effective for: Taxable years beginning after Dec. 31, 2022.
23. Rollovers and Substantially Equal Periodic Payment Arrangements
Secure 2.0, Section 323
This section could help some clients using SEPPs avoid a 10% excise tax on early retirement account distributions, by supporting an interpretation that some advisors have been using when helping the clients set up the SEPPs.
Effective for: Transactions occurring after Dec. 31, 2023.
24. Starter 401(k) Plans
Secure 2.0, Section 121
This section would create a new type of retirement plan for employers with no retirement plan and let an employer sponsor put up to $6,000 in employee contributions per year into the plan.
Effective for: Plan years after Dec. 31, 2023.
25. Top-Heavy Plan Rules and Excludable Employees
Secure 2.0, Section 310
This section could make your life easier if you’re in the executive compensation market and help high-income clients save more for retirement, by keeping workers who are not eligible to join a defined contribution retirement plan out of the plan’s fairness calculations.
Effective for: Plan years beginning after Dec. 31, 2023.
26. Rollovers From 529 Plans Accounts to Roth IRAs
Secure 2.0, Section 126
This section could let the owner of a 529 plan account that was at least 15 years old transfer up to $35,000 in cash from the plan into a Roth individual retirement account, for the benefit of the student, without necessarily having to include the amount rolled over in the taxable income of either the adults who put money into the account or the taxable income of the student.
Effective for: Distributions made after Dec. 31, 2023.
27. Safe Harbor for Corrections of Employee Elective Deferral Failures
Secure 2.0, Section 350
This section would help clients who sponsor 401(k) plans, 403(b) plans or 457 plans and who run into problems with administering the plan contributions. It would give those clients an orderly way to fix the problems.
Effective for: Problems that occur after Dec. 31, 2023.
28. Emergency Expense Withdrawals From Retirement Plans
Secure 2.0, Section 115
This section would create a provision retirement savers could use to take up to $1,000 out of retirement savings for emergency personal or family expenses without paying 10% early withdrawal penalties and without jeopardizing the plan’s compliance with IRS rules.
Effective for: Distributions made after Dec. 31, 2023.
29. Emergency Savings Accounts Linked to Individual Account Plans
Secure 2.0, Section 127
This section would let an employer offer employees an emergency savings account program, set up as a Roth account with post-tax income, with up to $2,500 in emergency savings per participant. A participant could make four withdrawals per year without paying withdrawal fees.
Effective for: Distributions made after Dec. 31, 2023.
30. Penalty-Free Withdrawals From Retirement Plans for Individuals Affected by Domestic Abuse
Secure 2.0, Section 314
This section would create a provision retirement savers could use to take up to $10,000 out of retirement savings without paying 10% early withdrawal penalties and without jeopardizing the plan’s compliance with IRS rules if they were the victims of domestic abuse.
Effective for: Distributions made after Dec. 31, 2023.
31. Treatment of Student Loan Payments as Elective Deferrals for Purposes of Employer Matching Contributions
Secure 2.0, Section 110
This section would replace the current legal basis for employer-sponsored student loan benefits programs, which is based on private letter rulings from the IRS, with a standardized regulatory framework.
Effective for: Plan years beginning after Dec. 31, 2023.
32. Retirement Savings Lost and Found
Secure 2.0, Section 303
This section calls for the U.S. Labor secretary to set up an online searchable database for locating retirement assets. Individuals could opt out.
Effective: Within two years after enactment.
33. Retirement Plan Portability
Secure 2.0, Section 120
This section would help a new employer group, the Portability Services Network, move the cash of a worker who had a low-asset employer-sponsored retirement plan account into a new employer’s retirement plan.
Effective: One year after the enactment date of the act.
34. Indexing IRA Catch-Up Limit
Secure 2.0, Section 108
This section would tie the caps on how much extra older savers can put in their retirement plans to the IRS cost-of-living-adjustment levels for retirement items.
Effective for: Taxable years beginning after Dec. 31, 2023.
35. Extra SIMPLE Plan Contributions
Secure 2.0, Section 116
This section would let an employer put extra contributions, up to 10% of each eligible employee’s compensation or a maximum of $5,000 per employee per year, into a Savings Incentive Match Plan for Employees of Small Employers, or SIMPLE plan. The employer would have to provide the same level of contributions, in percentage terms, for each eligible employee, and an eligible employee would have to have at least $5,000 in compensation from the employer.
Effective for: Taxable years beginning after Dec. 31, 2023,
36. Contribution Limits for SIMPLE Plans
Secure 2.0, Section 117
This section would increase the annual deferral limits for employers with employees in SIMPLE IRA plans.
Effective for: Taxable years beginning after Dec. 31, 2023,
37. Replacing SIMPLE Plans With Safe Harbor 401(k) Plans During the Year
Secure 2.0, Section 332
This section would help an employer change retirement plan types during the course of a year.
Effective for: Plan years beginning after Dec. 31, 2023,
2025
38. Provisions Relating to Plan Amendments
Secure 2.0, Section 501
This section would authorize retirement plan sponsors to make the amendments required by Secure 2.0 without the sponsors risking violations of the Internal Revenue Code and Employee Retirement Income Security Act rules governing plan amendments.
Effective: Jan. 1, 2025.
39. Higher Catch-Up Contribution Limit for Savers Ages 60 through 63
Secure 2.0, Section 109
This section would increase the amount retirement savers ages 60 through 63 can contribute to a maximum of $10,000, from $6,500, for 401(k), 403(b) and 457 plans, and to $5,000, from $3,500, for SIMPLE plans, indexed for inflation.
Effective for: Taxable years beginning after Dec. 31, 2024.
40. Expanding Automatic Enrollment in Retirement Plans
Secure 2.0, Section 101
This section would promote efforts to nudge workers into 401(k) plans and other retirement-sponsored retirement plans.
Effective for: Plan years beginning after Dec. 31, 2024.
2026
41. Retirement Plan Assets and Long-Term Care Insurance
Secure 2.0, Section 334
This section would let a retirement plan participant use up to $2,000 in plan assets per year, without paying the 10% excise tax on early withdrawals, to pay for stand-alone long-term care insurance or for a long-term care benefits hybrid incorporating an annuity contract or a life insurance policy.
Effective: Three years after the date of enactment.
42. Defined Contribution Retirement Plan Fee Disclosure Study
Secure 2.0, Section 340
This section requires the U.S. Labor secretary to give Congress ideas for help the participants understand the plan fees and expenses better.
Effective: Three years after the date of enactment.
2027
43. Saver’s Match
Secure 2.0, Section 103
This section would provide a matching tax credit of up to $2,000 for an individual’s contributions to a retirement plan.
Effective for: Taxable years beginning after Dec. 31, 2026.
2028
45. Tax Deferrals for Holders of an S Corporation’s Stock Who Sell the Stock to an ESOP
Secure 2.0, Section 114
This section would let the holder of an S corporation’s stock who sells the stock to the employer’s employee stock ownership plan, or ESOP, to defer taxes on up to 10% of the gains. Today, the tax deferral provision is available only to the holders of the stock of a C corporation.
Effective for: Sales after Dec. 31, 2027.
46. Pooled Employer Plan Reports
Secure 2.0, Section 344
This section would require the U.S. Labor secretary to publish comprehensive data on the size and performance of the market for pooled employer plans, along with recommendations for improving the pooled employer plan program.
Effective: Five years after enactment.
2029
47. Insurance Exchange-Traded Funds
Secure 2.0, Section 203
This section would make it easier for life insurers to add ETFs to variable life and variable annuity investment option menus.
Effective: Seven years after the date of enactment.
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Correction: The anticipated effective date year for Retroactive First-Year Elective Deferrals for Sole Proprietors was described incorrectly in an earlier version of this article. Secure 2.0 calls for the provision to take effect in 2023.