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by David Allen, JD


1. Requires auto-enrollment in 401(k) plans

Most employers starting new workplace retirement savings plans will be required to automatically enroll employees in the plan. (It is currently optional for employers to do so.) It would then be up to the employee to actively opt out if they don’t wish to participate.

The new law requires employers to set a default contribution rate of at least 3% but not more than 10% for the employee, plus an automatic contribution escalation of 1% per year up to a maximum contribution rate of at least 10% but not more than 15%.

The provision goes into effect after December 31, 2024.


2. Allows employer contributions for student loan payments

Law allows employers to make a matching contribution to an employee’s retirement plan based on their qualified student loan payments.

The provision goes into effect after December 31, 2023.


3. Increases the age for Required Minimum Distributions (RMD)

Moves RMD age up to 73 starting in 2023 and phases up to age 75 a decade later starting January 1, 2033.

The provision went into effect January 1, 2023.


4. Helps employees build and access emergency savings

Normally if you take a 401(k) distribution before age 59-1/2, you must not only pay taxes on that money, but also pay a 10% early-withdrawal penalty. Now employees can make a penalty-free withdrawal of up to $1,000 a year for emergencies. While employees would still owe income tax on that withdrawal in the year it’s taken, they could get that tax refunded if they repay the withdrawal within three years.

If they don’t repay the withdrawal, they will have to wait until the three-year repayment period ends before being allowed to make another emergency withdrawal.

The provision goes into effect after December 31, 2023.


5. Raises catch-up contribution limits for older workers

Currently, if you’re 50 or older you may contribute an additional $6,500 to your 401(k) on top of the annual federal limit in effect for the year. Under the retirement package, those aged 60, 61, 62, and 63 will be allowed to contribute $10,000 or 50% more than the regular catch-up amount in 2025, whichever is greater.

The provision goes into effect after December 31, 2024.

Another provision goes into effect a year earlier that requires anyone with compensation over $145,000 to make their catch-up contributions as Roth contributions. So, instead of making before-tax contributions up to the catch-up limit, you could still contribute the same amount, but you would be taxed on it in the same year.


6. Enhances and simplifies the Saver’s Credit

An underutilized federal match exists for lower-income earners’ retirement contributions of up to $2,000 a year. The new law enhances and simplifies the so-called Saver’s Credit so more people can use it. Eligible filers (e.g., married couples making $71,000 or less) could get a matching contribution from the federal government worth up to 50% of their savings, but the match cannot exceed $1,000.

The provision goes into effect after Dec 31, 2026.


7. Makes it easier for part-time workers to save

Part-time workers currently must be allowed to participate in a workplace retirement plan if they have three years of service and work at least 500 hours a year. The new law reduces that service time to two years.

The provision goes into effect after Dec. 31, 2024.