New SECURE Act Guidance Extends Plan Amendment Deadlines

Insight By
Mike Iley
Retirement Plans

IRS Notice 2022-33, issued on Aug. 3, 2022, extends plan amendment deadlines for key provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).  

Plan amendment deadlines are extended to Dec. 31, 2025 for the following provisions, which were the subject of IRS Notice 2020-68 that was previously released on Sept. 2, 2020:  

  • The small employer automatic enrollment credit (Section 105);
  • The repeal of the maximum age for traditional Individual Retirement Account (IRA) contributions (Section 107);
  • Participation of long-term, part-time employees in 401(k) plans (Section 112); and
  • Qualified birth or adoption distributions (Section 113).

The prior deadline for most plans was by the last day of the first plan year beginning on or after Jan. 1, 2022.  

Action Steps

Plan administrators should review the guidance and determine which types of plan amendments are necessary.

  • In general, the deadline to amend a plan for SECURE Act provisions is Dec. 31, 2025.  
  • The plan amendment deadline for a qualified governmental plan is 90 days after "the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after Dec. 31, 2023."

Plan administrators should also continue to monitor the status of the SECURE 2.0 legislation. Key proposals from SECURE 2.0 are described below.

Small Employer Automatic Enrollment Credit

Section 105 of the SECURE Act provides a business credit for eligible employers that establish an eligible automatic contribution arrangement (EACA) under a qualified employer plan. These terms are generally defined as follows:  

  • An eligible employer is one that has no more than 100 employees who received at least $5,000 in compensation from the employer for the preceding year.
  • An EACA requires the plan to include a cash or deferred arrangement under which participants are treated as having made an election to contribute at a uniform percentage of compensation, and that also satisfies certain notice requirements.
  • Qualified employer plans include 401(a) plans, 403(a) plans, SEPs, and SIMPLE retirement accounts, but do not include certain governmental plans or plans maintained by tax-exempt employers.  

The credit is equal to $500 for each taxable year during a three-year credit period (beginning with the first taxable year for which an eligible employer includes an EACA in a qualified employer plan that is sponsored). The credit applies to taxable years beginning after Dec. 31, 2019.

Implementation Guidance

IRS Notice 2020-68 provides the following implementation guidance on the credit:

  • Eligible employers may not receive a credit with respect to taxable years in more than one three-year credit period.
  • Eligible employers must include the same EACA in the same plan in the second or third taxable year to be eligible for the credit during the three-year credit period.
  • The credit applies separately to each eligible employer that participates in a multiple employer plan.

Repeal of Maximum Age for Traditional IRA Contributions

Section 107 of the SECURE Act repeals the prohibition on making contributions to individual traditional IRAs if the individual has attained age 70 ½. Accordingly, for contributions made after Dec. 31, 2019, individuals can contribute to traditional IRAs regardless of their age.

IRS Notice 2020-68 clarifies that a financial institution is not required to accept post-age 70 ½ contributions, but may choose to do so beginning after Dec. 31, 2019. If a financial institution chooses to accept post-age 70 ½ contributions, it must:

  • Amend its IRA contracts to provide for those contributions; and
  • Distribute a copy of the amendment and a new disclosure to each benefited individual.  

Participation of Long-Term, Part-Time Employees in 401(k) Plans

Section 112 of the SECURE Act allows employees that have completed at least 500 hours of service during three consecutive 12-month periods and have attained the age of 21 to become eligible to participate in a 401(k) plan. It also provides special vesting rules for these long-term, part-time employees, and modifies the break-in-service rules for these employees.  

Section 112 of the SECURE Act applies to plan years beginning after Dec. 31, 2020, except that, for purposes of determining a long-term, part-time employee’s eligibility to participate, 12-month periods beginning before Jan. 1, 2021, are not taken into account. However, the guidance clarifies that 12-month periods beginning before Jan. 1, 2021 are not excluded for purposes of determining a long-term, part-time employee’s nonforfeitable right to employer contributions.

Qualified Birth or Adoption Distributions

The Internal Revenue Code (Code) generally imposes a 10% additional tax on early distributions from qualified retirement plans (including an IRA or Roth IRA), unless the distribution qualifies for an exception. Section 113 of the SECURE Act adds a new exception for any qualified birth or adoption distribution.  

A qualified birth or adoption distribution is defined as any distribution of up to $5,000 from an applicable eligible retirement plan (i.e., a § 401(a) defined contribution plan, a § 403(a) annuity plan, a § 403(b) annuity contract, a governmental § 457(b) plan, or an IRA) to an individual, if made during the one-year period beginning on the date the child is born or the legal adoption is finalized.  

Implementation Guidance

IRS Notice 2020-68 includes the following key guidance for plans permitting qualified birth or adoption distributions:

  • A plan sponsor or plan administrator may rely on a reasonable representation from an individual that he or she is eligible for a qualified birth or adoption distribution.
  • If a plan permits qualified birth or adoption distributions, the plan is required to accept a recontribution of that distribution to that plan.
  • Plans are not required to offer individuals a direct rollover with respect to a qualified birth or adoption distribution, nor are they required to provide a notice under Code § 402(f).
  • Plan administrators of qualified birth or adoption distributions are not required to withhold an amount equal to 20% of the distribution, but they are subject to the voluntary withholding requirements of the Code.

Additional Topics

The guidance also addresses difficulty of care payments being taken into account as compensation in determining certain retirement contribution limitations, as well as issues under the Bipartisan American Miners Act of 2019 (which reduces the minimum age for in-service distributions).

Plan Amendments

In general, a plan amendment made pursuant to a provision of the SECURE Act—whether it is required or discretionary—must be adopted by Dec. 31, 2025. For governmental plans, the deadline is later. The amendment must apply retroactively to the effective date of the SECURE Act provision.

SECURE 2.0 Bill

On March 29, 2022, the U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022 (“SECURE 2.0”) with a bipartisan vote of 414-5. Key SECURE 2.0 proposals include:

  • Expanding automatic enrollment in 401(k) and 403(b) retirement plans (for plan years beginning after Dec. 31, 2023); '
  • Increasing the age for required minimum distributions (SECURE 2.0 would raise the age further to 73 starting on Jan. 1, 2023, to age 74 on Jan. 1, 2030, and to age 75 on Jan. 1, 2033);
  • Improving coverage for part-time workers in 401(k) plans by reducing the years of service requirements for long-term, part-time workers to participate (for plan years beginning after Dec. 31, 2022);
  • Increasing catch-up contributions for people aged 50 and over (for taxable years beginning after Dec. 31, 2023);
  • Allowing SIMPLE IRAs to accept Roth contributions (for tax years beginning after Dec. 31, 2022);
  • Treating student loan payments as elective deferrals for purposes of matching contributions (for plan years beginning after Dec. 31, 2022);
  • Modifying the credit for small employer pension plan startup costs (for taxable years beginning after Dec. 31, 2022); and
  • Establishing a national, online Retirement Savings Lost & Found Database for workers and retirees to find their lost retirement accounts (no later than two years after the date of enactment).

More information can be found here.

Insight By
Mike Iley
Managing Director
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Retirement Plans
Published on

August 16, 2022

updated on

August 16, 2022


This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.

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