2022 wrapped with a bang for plan sponsors nationwide as President Biden signed The Consolidated Appropriations Act of 2023, including the SECURE 2.0 ACT of 2022, into law. SECURE 2.0 is the evolution of the 2019 Setting Every Community Up for Retirement Enhancement Act, and, as expected, sweeping changes will come into effect. There are said to be over 90 retirement plan-related provisions addressed or implicated in some way in the updated legislation, some with future year effectiveness, and with a variety of employer activity, or inactivity, resulting in potential liability issues and organizational exposure involving employer decision makers.

In many instances, the provisions of the SECURE Act are designed to address the general concern that American workers are failing to accumulate sufficient financial resources to properly fund individual retirement lifestyles. As a result, employers and plan administrators need to determine which provisions apply to their plans, and how to remain in compliance as SECURE 2.0 comes into effect. Plan sponsors need to properly prepare, otherwise they could be at risk of a fiduciary breach. A fiduciary breach would almost inevitably result in litigation brought by the federal government, affected employees, or financially damaged third parties, and this could be quite costly to an organization without appropriate fiduciary liability insurance.

Distilling the changes moving the needle now

SECURE 2.0 increases the age of individuals mandated to begin Required Minimum Distributions (RMDs), previously set at 72 in the initial SECURE Act, to the age of 73 this year, and 75 beginning in 2033.  Retired workers will now be able to accrue greater potential tax-deferred earnings for a longer period of time.