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The SECURE 2.0 Act of 2022 (SECURE Act 2.0) is designed to build upon the provisions of the original SECURE Act to expand participation and boost retirement savings. The SECURE Act 2.0 also makes important changes to the age for required minimum distributions that will help retirees with decisions that will enhance their ability to make better use of their retirement savings.

Required Minimum Distributions

Under current law (as enacted as part of the original SECURE Act), plan participants are required to begin taking distributions (“required minimum distributions” or “RMDs”) at age 72. Under the SECURE Act 2.0, the age at which participants must begin taking distributions is increased over a period of ten years. The age is increased to 73 for individuals who attain age 72 after December 31, 2022, and age 73 before January 1, 2033. The age at which participants must begin taking RMDs is further increased to 75 for individuals who attain age 74 after December 31, 2032. The increased age for RMDs is effective for tax years beginning after 2022.

Beneficiaries of Special Needs Trusts

The SECURE Act 2.0 also amends the required minimum distribution rules related to special needs trusts by replacing “no individual” with “no beneficiary” and clarifies that any beneficiary that is a “publicly supported” charitable organization shall be treated as a designated beneficiary.

Penalty Reform

The SECURE Act 2.0 also reduces the penalty on failures to take a required minimum distribution from 50 percent to 25 percent. The 25 percent penalty is further reduced to 10 percent if corrective action is taken in a timely manner. The reduction is effective for tax years beginning after 2022.

The changes under the provisions of the SECURE Act 2.0 affect individuals and beneficiaries of retirement plans and the required age of distributions under the revised tax law. Please contact your Sisterson representative if you have questions.