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Retirement plans and the Secure 2.0 Act – tax planning for 2024

Signed into law on December 29, 2022, the focus of the Secure Act was to increase retirement savings and simplify and clarify retirement plan rules. So, what should taxpayers be thinking about as they begin tax planning for 2024? Here are the provisions to look at –

Student loan payment matching

SECURE 2.0 Act Section 1104 provides that employers may make matching contributions to a retirement plan when employees make qualified student loan payments, for defined contribution plans in years beginning after Dec. 31, 2023.

Expansion of penalty-free withdrawals

The following withdrawal types will not generate an early withdrawal penalty in 2024-

Emergency personal expense distributions

Distribution in case of domestic abuse

Individuals with a terminal illness

Qualified disaster recovery


Emergency savings accounts linked to retirement plans –

Uncertainty surrounding the possible need to tap into retirement savings for urgent financial needs often discourages retirement plan participation, because of the penalties associated with early fund withdrawals. To mitigate this employee hesitation, act Section 127 introduces emergency savings accounts linked to an employer’s retirement plan. Employers may automatically enroll non–highly compensated employees (defined in 2023 as those earning up to $150,000) at no more than 3% of their salary, limited to $2,500. The employee’s first four withdrawals each plan year may not be subject to any withdrawal fees.

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