Everything You Didn't Know Was in SECURE 2.0, But Should: PSCA National

It probably feels like plan sponsors have been reading about SECURE 2.0 nonstop since last November. How could there possibly be more to know? Well, a lot of it will help plan sponsors. 

The Everything You Didn't Know Was in SECURE 2.0, But Should Know About session detailed the bits and pieces that plan sponsors have overlooked. 

PSCA President Robin Hope opened the session by asking audience members to look at the information from a different perspective. "Instead of looking at it from a wide lense of, 'How will I get this all done?' Really look it at from the participant side of things," Hope articulated.  

"Look at it from the light of 'I think my participants may really benefit from this. I think this may really help me," Hope added.

The session included speakers Adam Greetis and Kelsey Mayo, J.D., who explored the many detailed complex provisions, the potential for amendments, and what the next few years hold for plan sponsors regarding SECURE 2.0 implementation. 

Natural Disasters

Mayo started the discussion by referencing one of the most immediately effective distributions for participants: natural disasters. 

"If you have employees who are in natural disaster areas, that can be a huge hardship when a big hurricane comes, when a wildfire comes, when the tornadoes come," Mayo said. 

Instead of waiting for Congress to authorize relief every time a natural disaster occurs (many cases months after).

The participant would be allowed $22,000 per distribution and may repay all or part of the distribution during the three-year period beginning when the distribution was first taken. 

"I think this could be a huge way to serve your participants," Mayo explained. 

Emergency Personal Expense Distributions

Segwaying from hardship to personal expense distributions, a participant may take an emergency personal expense distribution once per year for up to $1,000. 

The idea is that broader hardships can exist and having more choices for your employees gives them more flexibility to pay basic expenses, especially if they don't have the funds to do it right now. 

"There [are] good brakes on the leakage risk here, with the limitations on how often you can request your participants can request it and the opportunity to repay the standard," Greetis mentioned.

The purpose of the distribution is to meet unforeseeable or immediate financial needs relating to necessary personal or family emergencies and it would be available in 2024. 

"It's very narrowly designed to be once a year, up to $1,000. It's designed to be a 'don't do this all the time,'" Mayo said.

Qualified Long‐term Care Distribution

Coupled with the terminal illness distribution (which isn't new, but still confusing), qualified long-term care distributions may pay for insurance for the employee or spouse (or other family members under IRS regs). There is an exemption to the 10% tax penalty. It would begin on December 29, 2025. 

"It's the public policy solution to the long-term care dilemma, right? Like long-term care coverage has a lot of social utility to it, right? Long-term care can be very, very expensive," Greetis adds. 

Eligibility is based on the lesser of $2,500 (indexed) or 10% of the vested account. Long-term care insurance is already costly, so potentially using retirement funds to buy it is an interesting concept. 

"This is almost this incentive to use part of their retirement funds to buy long-term care insurance, which is interesting," Mayo explained.

529 Plan Rollovers

Have a participant with an unused 529 asset with a plan that has been in place for 15 years? The participant can make a $35,000 contribution to a ROTH IRA for a beneficiary, presenters said. 

Retirement Savings Lost and Found

One part of SECURE 2.0 that has excited many is the Retirement Savings Lost and Found. The DOL is tasked with creating an online searchable lost and found database of retirement plans. Within the database, plan participants would be enabled to search for the contact information of their plan administrator if they lost track of their retirement plan.

As mentioned by Lisa M. Gomez during the Day One General Session, the creation of the database is an "exciting and daunting task." 

Plans will report on missing and unresponsive participants and have them entered into the database accordingly. The database is due by the end of 2024 for launch. There is hope for coordination with the SSA office.