On March 29, 2022, the U.S. House of Representatives voted almost unanimously in favor of SECURE Act 2.0, also known as the Securing a Strong Retirement Act (H.R. 2954). SECURE Act 2.0 expands upon the retirement savings solutions set forth in the SECURE Act, which passed in December 2019.
As sweeping legislation aimed at assisting Americans in saving for retirement, SECURE Act 2.0 would impact unclaimed property analysis, reporting and compliance. Here is a summary of the key provisions:
Increases to RMD Age, in Phases, to Age 75
The first SECURE Act increased the age to begin taking required minimum distributions (RMD) from a retirement account from age 70.5 to 72. Over the next ten years, SECURE Act 2.0 would further increase the RMD age from age 72 to 75, as follows:
• Age 73: if the individual attains age 72 after 12/31/2022, and age 73 before 1/1/2030;
• Age 74: if the individual attains age 73 after 12/31/2029, and age 74 before 1/1/2033; and
• Age 75: if the individual attains age 74 after 12/31/2032.
These changes would apply to distributions required to be made after 12/31/2022, with respect to individuals attaining age 72 after this date.
Under most state unclaimed property laws, retirement accounts are presumed abandoned if the owner fails to take a required distribution or otherwise interact with the account after the date that a distribution is required under federal law. Therefore, the RMD age is a factor for triggering dormancy for retirement accounts. If the bill passes, changes to the RMD age should be updated and reflected in a business’s escheatment analysis and reporting tools to account for these changes.
And while many of the retirement provisions refer to the RMD age as per federal law, states that have adopted the 2016 Revised Uniform Unclaimed Property Act (RUUPA), in whole or in part, either specifically reference age 70.5 (even after the passage of the SECURE Act), age 72, or use more generic language that references the minimum required distribution age under the Internal Revenue Code or by federal regulation. As such, it is important to track and monitor state unclaimed property laws and stay abreast of all legislative activity.
Expands Auto-Enrollment for Some Retirement Plans
If passed, SECURE 2.0 would require that employers automatically enroll new employees into retirements plans (such as 401(k), 403(b) and SIMPLE plans), though there are exceptions for small businesses (less than 10 employees), businesses less than 3 years old, and for church and governmental plans. The relevant provisions in SECURE Act 2.0 related to auto-enrollment would apply to plan years beginning after December 31, 2023. Increasing the number of enrolled employees could increase the population of retirement accounts that could become eligible for escheatment in the future.
Creates the Retirement Savings Lost & Found Database
Secure Act 2.0 would also direct the Secretary of Labor, in consultation with the Secretary of the Treasury to establish an online searchable database, to be known as the “Retirement Savings Lost and Found”, within 2 years after the enactment of SECURE Act 2.0. Individuals would be permitted to search the database, which will be maintained by the Department of Labor, for information allowing them to locate and contact plan administrators so that they can be reunited with lost retirement accounts.
SECURE 2.0 is presently in the Senate for consideration. The Senate has introduced similar legislation, including the Retirement Security and Savings Act (S. 1770), and the Improving Access to Retirement Savings Act (S. 1703).
We will continue to update you as these bills make their way through their respective legislative channels, as we may see additional changes to the retirement provisions. If you have question, contact us to speak with one of the MarketSphere specialists.
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*Content contained in this article is considered accurate as of the publish date.