SECURE 2.0 Changes that Become Effective in 2024

The SECURE 2.0 Act, enacted late in 2022, creates new tax-saving opportunities for retirement savers — in some cases, with assistance from employers. Several provisions already kicked in during 2023, while others have made their debut in 2024 or will become effective in the future. Here’s an overview of the key changes taking effect this year.


In recent years, Congress passed two of the biggest retirement planning laws in decades. First, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law in 2019. This law brought sweeping changes to retirement planning. Key provisions of the SECURE Act include:

  • Pushing back the starting age for required minimum distributions (RMDs) from 70½ to 72,
  • Increasing the employer tax credit for establishing qualified retirement plans, and
  • Adding an exception to the early withdrawal penalty for adoption expenses.

Notably, this law also closed a classic loophole for “stretch IRAs” that allowed nonspousal beneficiaries to extend RMDs over their lifetimes.

The second law, dubbed SECURE 2.0, increased the age threshold for RMDs to 73, starting in 2023, for individuals who attain age 72 in 2023 through 2032. Furthermore, it increased the threshold to 75, starting in 2033, for individuals who attain age 74 after 2032. Other key provisions reduce the penalty for failing to take RMDs, enhance the catch-up contribution rules for participants in their 60s, overhaul the rules for the retirement saver’s credit and encourage automatic enrollment in qualified plans. However, the effective dates for the changes are staggered, which complicates matters.

What’s New in 2024?

Retirement savers and employers should be aware of the following SECURE 2.0 provisions that take effect in 2024:

Employer-sponsored Roth plans. With a Roth IRA, future distributions may be exempt from tax, unlike payouts from traditional IRAs. Employers can offer comparable benefits to participants in employer-sponsored Roth accounts, including Roth 401(k), Roth 403(b), and Roth 457 plans. These accounts must be funded with after-tax contributions. Usually, contributions are made through regular payroll deductions.

Roth IRA participants aren’t required to take lifetime RMDs. But up until now, participants in employer-sponsored Roth plans did have to take RMDs. Beginning in 2024, SECURE 2.0 puts participants in employer-sponsored Roth accounts on equal footing with Roth IRA owners by not requiring them to take lifetime RMDs.

Emergency withdrawals. Generally, a 10% tax penalty potentially applies to early withdrawals made before age 59½ from tax-deferred retirement accounts, such as traditional IRAs and company-sponsored qualified retirement plan accounts. However, there are several exceptions to the 10% penalty, such as withdrawals taken while disabled or to pay qualified higher education expenses. SECURE 2.0 creates a new exception for distributions made after 2023 that are used for emergencies that are “unforeseeable or immediate financial needs relating to personal or family emergency expenses.”

Beware: Only one distribution of up to $1,000 is allowed per year. Furthermore, the participant must repay the distribution within three years, and no subsequent distributions can be made during the three-year period unless repayment occurs.

Pension-linked emergency savings accounts (PLESAs). Separate from the penalty-free emergency withdrawals described above, SECURE 2.0 enables providers of 401(k) and other qualified plans to offer ESAs to participants with “unforeseeable or immediate financial needs relating to personal or family emergency expenses.” These accounts are funded with post-tax Roth contributions and can be automatically enrolled. Funds are invested in interest-bearing accounts with no minimum contribution or balance requirements.

The maximum annual contribution to a PLESA is $2,500 (indexed annually for inflation). Participants must be allowed to take at least one withdrawal per month. The first four withdrawals are exempt from administrative fees. Plans can be amended to allow PLESAs after 2023. (The IRS recently released guidance on PLESAs in Notice 2024-22 and the U.S. Department of Labor published answers to frequently asked questions about the accounts.)

New early withdrawal exception for domestic abuse victims. SECURE 2.0 adds an exception to the 10% tax penalty on early withdrawals from retirement accounts after 2023 made by participants self-certifying that they’ve been victimized by domestic abuse. The maximum withdrawal allowed is the lesser of:

  • $10,000, indexed annually for inflation, or
  • 50% of the account balance.

Participants can repay these amounts over three years and obtain refunds for tax paid on distributions.

IRA catch-up contributions. Participants in IRAs, including both traditional and Roth IRAs, who are 50 or older can make additional catch-up contributions to their accounts. Previously, the annual limit on catch-up contributions was set statutorily at $1,000. SECURE 2.0 authorizes indexing for inflation, beginning in 2024. The limit remains $1,000 in 2024, but under this provision, it may increase in future years.

Two-Year Delay on Catch-Up Contribution Provision

As with IRAs, catch-up contributions can be made by participants in employer-sponsored qualified retirement plans who are 50 or older. The catch-up contribution limit is $7,500 for 2023 and 2024. SECURE 2.0 enhances the limits on catch-up contributions for those ages 60 to 63, beginning in 2025.

The caveat: Catch-up contributions for any employee earning $145,000 or more, including those in their 50s, must be made to a Roth account. This threshold will be adjusted annually for inflation. Initially, this provision was scheduled to take effect in 2024. But the IRS subsequently postponed the requirement for two years, until 2026.

Student loan payments. SECURE 2.0 provides an opportunity for qualified plan participants to repay their student loan debts. It authorizes employers to make matching contributions to qualified student loan payments after 2023, subject to nondiscrimination requirements. For these purposes, a qualified student loan payment is a debt incurred by the employee solely to pay qualified higher education expenses.

Section 529 rollovers. A Section 529 plan is a tax-favored account used to fund higher education expenses. Parents and grandparents can contribute to these accounts within generous limits and benefit several family members. But what happens with funds left in the account after graduation? Under SECURE 2.0, funds can be rolled over to a Roth IRA without any tax, subject to annual Roth IRA contribution limits, up to a lifetime cap of $35,000. To be eligible for this option, the account must have been open for more than 15 years.

Mandatory distributions. To ease administrative obligations of employers operating 401(k) plans, current tax law permits a company to transfer the vested 401(k) benefits of former employees if they have an account balance of more than $1,000 but no more than $5,000. SECURE 2.0 permits employers to make these mandatory distributions, starting in 2024, for former employees if the account balance is as high as $7,000 — an increase of $2,000.

Hardship 403(b) distributions. 403(b) plans are qualified plans operated by not-for-profit entitles that are similar to 401(k) plans. Under SECURE 2.0, for plan years beginning after 2023, 403(b) plans can accommodate hardship distributions under rules that essentially mirror those for 401(k)s. This includes provisions on qualified nonelective contributions, matching contributions and earnings on contributions.

For More Information

SECURE 2.0 will have a wide-ranging impact in 2024. Individuals may take steps to maximize benefits, while employers could be required to make plan amendments. Contact your tax advisors to determine how the latest changes affect you and your company.

Copyright 2024

This article appeared in Walz Group’s January 22, 2024 issue of The Bottom Line e-newsletter, produced by TopLine Content Marketing. This content is for informational purposes only.