When Will SECURE 2.0 Errors Get Fixed
When Will SECURE 2.0 Errors Get Fixed
SECURE 2.0 that was passed at the end of 2022 has at least three errors that will need corrected soon. We review those errors.
The original SECURE Act was passed at the end of 2019 (we are still waiting for final guidance on inherited required minimum distributions (RMD) after the owner’s required beginning date) and SECURE 2.0 was passed three years later.
As usual when an Act with over 100 pages is enacted, there will be some errors. As far as we can tell, there is at least three errors.
First, the RMD age increased from 70 1/2 to age 72 with SECURE. SECURE 2.0 increases the RMD age to 73 effective January 1, 2023. It then increases it to age 75 in 2033.
However, for those born in 1959, there is currently two RMD ages in 2033. The error in the law states that they will have an RMD of 73 or 75 in 2033. Likely the correct answer is age 73, but Congress will need to fix it. However, knowing Congress it will not be fixed until December 2032.
A more pressing issue is that starting in 2024, high income earners (those earning more than $145,000 in the previous year from wages at the company) will have to do catch-up contributions in ROTH form. This means that these contributions will not be deductible, but the earnings on them will be tax-free when distributed.
However, a glitch in writing the bill indicates that all catch-up contributions starting in 2024 will be disallowed. Obviously, this will need corrected soon (but again the projection that it will happen in December, 2023).
Last, there is an issue with SEPs and SIMPLE allowed to do ROTH contributions now. There was an error in how this affected the overall ROTH limitations. This also needs corrections soon.
The bottom line is that Congress will likely address these issues this year, but it is not guaranteed. We will keep you posted.