PLANSPONSOR - May - June 2023 - 11

many employers need low earners in
their plans to pass top-heavy testing, this
provision may come at the expense of
things such as a more competitive and
quickly vested employer match.
Tax Revenue Sustainability
The drafters of SECURE 2.0 were very
conscious of its budget score and making
sure it would be " paid for " within the
normal 10-year time frame used by
Congress to evaluate the tax price of a bill,
says Iwry. Since the window for budget
scoring is only 10 years long, SECURE
2.0 was able to account for most of its
expenses by encouraging Roth contributions,
as opposed to traditional ones.
Requiring that catch-up contributions
made from earnings of $145,000plus
be saved in Roth accounts was a
way to raise revenue for the bill, as the
income tax is paid upfront, Iwry notes.
Left Out
Radpour observes that self-employed
workers and independent contractors are
wholly left out of the SECURE 2.0 Act. As
the " gig economy " expands, this point will
likely become a more salient one, he says.
The legislation also excludes parttimers
with less than two years of service
or workers who have put employment
on hold to raise children or serve as
caregivers.
Further, SECURE 2.0 does very
little to reform annuities. The legislation
makes it easier to invest in qualified
longevity annuity contracts by increasing
the maximum amount one can spend
from a retirement account to buy one.
It also loosens RMD rules for partially
annuitized plans. Guaranteed income
was simply not a focus of the legislation,
to the chagrin of many who saw guaranteed
income as an essential element of
retirement security.
The SECURE Act of 2019 made
it easier to offer lifetime income in a
defined contribution plan by protecting
employers from liability if they select
an annuity provider that meets certain
ASK THE EXPERTS
The '2.0' Student Loan Provision
QUESTION: Our 403(b) plan fiduciaries are interested in the new student
loan repayment provision of the SECURE 2.0 Act, but we don't currently have
a matching contribution. Do we need one in order to add this provision?
ANSWER: Unfortunately, it does appear that way. The new student loan repayment
provision in Section 110 of the Setting Every Community Up for Retirement
Enhancement 2.0 Act of 2022, which allows student loan repayments to be treated
as elective deferrals in 403(b), 401(k) and governmental 457(b) plans, beginning in
2024, amends Section 401(m) and other sections that specifically relate to matching
contributions. The provision specifically provides for matching contributions on
student loan repayments at the same rate as those on elective deferrals, and only for
those employees eligible to receive matching contributions on elective deferrals, thus
anticipating the use of such student loan repayments only in a plan with employer
matching contributions on elective deferrals.
The IRS has been directed under SECURE 2.0 to publish regulations to implement
the amendments under this provision; therefore, that agency may provide some
additional clarity on the requirements of such program.
Kimberly Boberg, Taylor Costanzo, Kelly Geloneck and David Levine, with Groom
Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer
readers' questions. This does not constitute legal advice and cannot be used or
substituted for legal or tax advice. Forward your questions for the experts to Amy
.Resnick@issmediasolutions.com, with " Ask the Experts " as the subject.
TIDBITS
Portability Services Expand
TIAA joins other recordkeepers in the consortium
started by Retirement Clearinghouse LLC that
automatically transfers accounts of under $5,000
in a 401(k), 401(a), 403(b) or 457 retirement plan
to a new employer's plan when the participant
changes jobs.
criteria. But observers agree that in-plan
annuities remain complicated and adoption
has been limited.
If SECURE 2.0 did little to help
guaranteed income, then it did nothing
for the closest thing to a guaranteed
annuity that all workers contribute to and
get upon retirement: Social Security.
Radpour says that, while SECURE
2.0 did a lot of good, " it is regrettable that
we are already looking to SECURE 3.0. "
-Paul Mulholland
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