Secure Act Provisions Effective for 2025

The IRS has issued final regulations updating some changes made by the SECURE and the SECURE 2.0 Acts that may impact your retirement asset legacy.

The 10-Year Distribution Rule

The final regulations answer the big question: Can a deceased plan owner's beneficiary who's started required minimum distributions (RMDs) be required to continue them, or can the remaining account balance be fully distributed within 10 years of the original plan owner's death? The answer is that the beneficiary must continue receiving annual payments. Exceptions may apply. Check with a trusted financial professional.

The IRS also clarified that an employer-defined-contribution plan may provide that if an employee participating in the plan dies before the required beginning date, then an eligible designated beneficiary (including a surviving spouse) may elect to receive the plan benefits using the 10-year rule or as annual payments over their life expectancy.

More 2025 Provisions

Other SECURE ACT provisions apply beginning in 2025.

For individuals, the SECURE 2.0 Act increased annual retirement catch-up contribution limits to either $10,000 or, if you're age 60 to 63, 150% of the 2024 catch-up contribution limit as indexed for 2025.

For employees and employers, part-time workers who have completed at least 500 hours of service must be allowed to participate in a business's retirement plan after two years, reduced from three years in 2024. Also, employers starting 401(k) and 403(b) plans generally must automatically enroll workers at an initial contribution rate of 3% of pay, with annual automatic deferral increases of 1% up to at least 10%. There's an exemption for existing plans.

In addition, the final regulations define new ages for RMDs from employer retirement plans. While those born before July 1, 1949, generally must still begin RMDs at 70-1/2 , if you were born between that date and January 1, 1951, you can wait until age 72. Individuals born between the beginning of 1951 and the first day of 1959 can postpone taking out assets until they reach age 73, and employees born on or after the first day of 1960 needn't start until they reach 75.