Treasury Update on SECURE 2.0 Guidance Projects: Key Takeaways from Helen Morrison’s Speech
On June 4, 2024, Helen Morrison, Benefits Tax Council at the U.S. Department of the Treasury, provided an update on the SECURE 2.0 guidance projects during the SPARK/DCIIA Public Policy Forum. Although the update was not exhaustive, it aligned with prior briefings from Treasury and IRS officials, while also revealing a few noteworthy new details.
Roth Catch-Up Mandate
Consistent with earlier statements, Morrison reiterated that the Treasury and IRS are diligently working on guidance for the Roth catch-up mandate.
Section 414 (v) (7) of the IRS Code mandates Roth treatment for all catch-up contributions made by an individual whose FICA wages for the previous year exceed $145,000. Any elective deferral contribution, including catch-up contributions, made on a Roth basis are not excludable from an individual’s gross income.
This guidance will be presented as proposed regulations, anticipated to be released by the end of the year, potentially sooner. Importantly, Morrison emphasized that there will be no extension of the 2026 deadline for this mandate.
Required Minimum Distribution (RMD) Regulations
We are on the lookout for the final required minimum distribution (RMD) regulations. The forthcoming regulations will feature a distinct section addressing some SECURE 2.0 provisions impacting RMDs. Notably, the inclusion of guidance on SECURE 2.0’s “partial annuitization” provision is a new development. This provision, already in effect, has been challenging to implement without clear guidance. Morrison also indicated that the effective date for these final regulations is not expected to be delayed beyond 2025. This aligns with the stance that the proposed regulations have been publicly available for some time.
Automatic Enrollment Mandate
The Treasury and IRS had previously provided preliminary guidance on SECURE 2.0’s automatic enrollment mandate in the “grab bag” notice (2024-2). While acknowledging that this notice did not address all pertinent questions, Morrison confirmed that proposed regulations are in the works to expand upon the initial guidance. However, no specific timeline was provided for this regulatory update.
Pension Linked Emergency Savings Accounts (PLESAs)
Morrison highlighted that additional guidance on Pension Linked Emergency Savings Accounts (PLESAs) is forthcoming, likely in the form of a notice. Although no timeline was given, this guidance is a priority for the current administration. Despite the complexity of PLESAs leading to limited interest from plan sponsors and service providers, the broader topic of emergency savings remains a prominent issue.
$1,000 Emergency Savings Provision
SECURE 2.0 also includes a provision allowing for an annual distribution of up to $1,000 for emergency savings. Morrison revealed that guidance on this provision is “far along,” a significant update not previously disclosed in earlier meetings.
Student Loan Matching Contributions
Lastly, Morrison addressed the SECURE 2.0 provision on matching contributions for student loan repayments. She noted that the guidance on this provision is also “far along,” expressing her initial hope that it would have been issued by now. This suggests that the release of this guidance could be imminent.
Conclusion
Helen Morrison’s update at the SPARK/DCIIA Public Policy Forum provided crucial insights into the ongoing SECURE 2.0 guidance projects. While some areas continue to evolve, the consistent efforts of the Treasury and IRS indicate a strong commitment to providing clear and actionable regulations. As these projects progress, staying informed about their developments will be essential for all stakeholders involved in retirement planning and benefits administration.
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