Congress Tells Treasury SECURE 2.0 Corrections Are Coming
On May 23, Congress sent a letter to the Treasury Department informing Secretary Janet Yellen and IRS Commissioner Daniel Werfel that it will introduce legislation to fix several technical errors contained in SECURE 2.0.
Signed by four prominent SECURE 2.0 figures—House Ways and Means Committee Chairman Jason Smith (R-MO), Ranking Member Richard Neal (D-MA), Senate Finance Committee Chairman Ron Wyden (D-OR), and Ranking Member Mike Crapo (R-ID)—the fixes will better reflect congressional intent, according to the letter.
“We intend to introduce technical corrections legislation to correct erroneous statutory language, which may include items not addressed in this letter," they wrote, highlighting four provisions specifically, sections 102, 107, 601, and 603.
SECURE 2.0 Section 102 increased the tax credit to start an employer-based plan. The letter’s authors said, “The provision could be read to subject the additional credit for employer contributions to the dollar limit that otherwise applies to the startup credit.”
However, Congress intended the new credit for employer contributions to be in addition to the startup credit otherwise available to the employer.
Section 107 dealt with required minimum distributions (RMD) and increased the age at which RMDs must be taken.
Congress intended to increase the age from:
- 72 to 73 for individuals who turn age 72 after Dec. 31, 2022, and who turn 73 before Jan. 1, 2033,
- and to increase the applicable age from age 73 to age 75 for individuals who turn 73 after Dec. 31, 2032.
“However, with respect to the increase from age 73 to age 75, the provision could be read to apply such [an] increase to individuals who turn 74 (rather than 73) after December 31, 2032, which is inconsistent with Congressional intent,” they clarified.
Section 601 permitted SIMPLE IRA and SEP plans to include a Roth IRA. It might be read as requiring SEP and SIMPLE contributions to be included in determining whether or not an individual has exceeded the contribution limit to a Roth IRA.
“However, Congress intended to retain the result under the law as it existed before SECURE 2.0 was enacted regarding SIMPLE IRA and SEP contributions. Thus, Congress intended that no contributions to a SIMPLE IRA or SEP plan (including Roth contributions) be taken into account for purposes of the otherwise applicable Roth IRA contribution limit,” the letter says.
SECURE 2.0 required any catch-up contributions to be made as a Roth beginning after 2023 if the participant made more than $145,000 the preceding year.
Yet a conforming change to section 603 “might be read by some to disallow catch-up contributions (whether pre-tax or Roth) beginning in 2024,” something first identified by the American Retirement Association in January.
“Congress did not intend to disallow catch-up contributions nor to modify how the catch-up contribution rules apply to employees who participate in plans of unrelated employers,” the letter concluded. “Rather, Congress’s intent was to require catch-up contributions for participants whose wages from the employer sponsoring the plan exceeded $145,000 for the preceding year to be made on a Roth basis and to permit other participants to make catch-up contributions on either a pre-tax or a Roth basis.”