SECURE 2.0: Technical Corrections



As anticipated, a bipartisan group of leaders in Congress have signaled that they will issue corrections related to the massive SECURE 2.0 Act which was passed at the end of 2022. Although no timeframe has been given for the release of detailed corrections, the intentions behind some of the ambiguous provisions have been clarified.


Errors and Ambiguities

Given the ambitious and comprehensive nature of SECURE 2.0, it is perhaps not surprising that clarification is needed on some of its measures. As Plan Sponsor reports, the process for addressing ambiguities and errors has begun: “Congressional leaders wrote an open letter to Secretary of the Treasury Janet Yellen and IRS Commissioner Daniel Werfel clarifying what Congress intended with certain provisions of the SECURE 2.0 Act of 2022. In the letter, a bipartisan group of Senate and House members said they intend to correct those technical errors, but they did not spell out a timetable.” Specifically, leadership of the Senate Committee on Finance and the House Committee on Ways and Means have “identified Sections 102, 107, 601 and 603 as containing various technical errors or ambiguities.”


Small businesses may especially appreciate knowing that one of the clarifications  to SECURE 2.0 that the recent Congressional letter provides relates to the start-up tax credit intended to help them:


Section 102 increases the startup tax credit for small employers from 50% of the costs of starting a retirement plan to 100%, up to a maximum of $5,000. The section also provides a tax credit for matching contributions made for the first five years of a new plan sponsored by an employer with 100 or fewer employees, up to a per-employee maximum of $1,000.

According to the letter, the $5,000 limit on the startup credit could be read as applying to the matching contribution credit as well, or a $1,000-per-employee limit up to $5,000 total. However, Congress did not intend for the $5,000 to apply to the credit for employer contributions. The letter explains: “Congress intended the new credit for employer contributions to be in addition to the startup credit otherwise available to the employer.”


As the retirement industry has dug into SECURE 2.0, one of the most buzzed about technical errors in the legislation has been related to Section 603, which is also addressed by the Congressional letter. Plan Sponsor shares this summary:


Section 603…requires catch-up contributions made by highly-compensated employees to be made to a Roth account, starting in 2024. This section accidentally removed catch-ups entirely for everyone, Roth or not. As the letter explained, “Congress did not intend to disallow catch-up contributions … Congress’s intent was to require catch-up contributions for participants whose wages from the employer sponsoring the plan exceeded $145,000 for the preceding year to be made on a Roth basis and to permit other participants to make catch-up contributions on either a pre-tax or Roth basis.”

Despite the pending technical corrections and clarifications, the substantive measures of SECURE 2.0 still require the attention of plan sponsors in real time. As Plan Sponsor observes: “The letter did not direct the Department of the Treasury to make regulations in the interim to ensure Congressional intent is carried out, but instead communicated that Congress will correct the errors on their own. The letter also did not broach an extension of compliance dates….” Helpful information to help retirement plan sponsors move forward and prioritize action steps related to SECURE 2.0 provisions and deadlines is available right here.


Avoid This Error…

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