Update on Secure Act 2.0 Retirement Plan Reforms

Late December 2022, President Biden signed into law the Secure Act 2.0 as part of the Consolidated Appropriations Act of 2023. Secure 2.0 is aimed to help people save and invest for a more secure retirement. The law has many provisions spanning most retirement saving options: defined contribution plans, defined benefit plans, IRAs and more. Some of the new provisions take effect in 2023, while most others will take effect in 2024 and beyond.

We are actively reviewing the new law to determine its impact on the all of UC’s Retirement plans – 403(b), 457(b), DC Plan and Pension Plan – and will provide updates throughout the year.

Eligible Distributions for Domestic Abuse Victims (New)

  • Effective January 1, 2024, if you are a victim of domestic abuse, you can self-certify your status and request a distribution for up to the lesser of $10,000 or 50% of your vested account balance in the UC 403(b), 457(b) or DC Plan. Call 1-866-682-7787 to get help with your request.
  • The distribution is not subject to the 10% additional tax on early distributions, and you can repay the withdrawn money over three years.

403(b) Plan Hardship Withdrawals From Accumulated Earnings (New)

  • Effective January 1, 2024, the Tax-Deferred 403(b) Plan allows for hardship withdrawals of your accumulated earnings. Previously, only contributions were eligible for withdrawal.
  • Note: You are required to take a loan before obtaining a hardship withdrawal from your accumulated earnings.

Change to Penalty on Early Withdrawals for Individuals with a Terminal Illness (New)

  • If you have a terminal illness and have funds available to make a withdrawal from a UC Retirement Savings plan – 403(b), 457(b) and DC Plan – the withdrawal will not be subject to the 10% additional early withdrawal penalty normally required for participants under age 59½. In addition, the withdrawal may be repaid within three years. Note: This provision did not change the eligibility requirements to take a withdrawal. Only the taxation of an eligible withdrawal has changed.
  • You will be required to provide sufficient evidence of the terminal illness in the form and manner prescribed by the IRS.

New Rules that Impact UC 457(b) Plan Contribution Timing

  • UC's 457(b) plan will process contributions in the same manner as the UC 403(b) Plan and the DC Plan (after-tax). This means that, beginning in April 2023, contributions (including new deferrals, changes to deferrals and cancellations) in the UC 457(b) Plan will take effect with the next available paycheck (subject to payroll cut-off dates).

Required Minimum Distribution (RMD) Age Increase

  • The RMD (also known as a required minimum distribution) age increases from 72 in 2022 to 73 in 2023, and to 75 in 2033.
  • RMD rules apply to all UC voluntary plans – 403(b), 457(b) and DC Plan, as well as the UC Retirement Plan.
  • Find out more about RMDs.

QLAC Maximum Purchase Increase

  • A QLAC (Qualifying Longevity Annuity Contract) is a special type of annuity that helps guarantee income for life in retirement. The new maximum purchase amount for QLACs is $200,000.
  • UC offers a QLAC called, Deferred Lifetime Income, only for participants in the UC Retirement Savings Program (UC RSP). This means that eligible UC RSP participants can now purchase up to $200,000 in Deferred Lifetime Income and start receiving monthly payments for life starting at age 78.
  • Find out more about Deferred Lifetime Income, including age and other requirements.

Higher catch-up contributions

  • Starting January 1, 2025, individuals ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 annually to a workplace plan, and that amount will be indexed to inflation. (The catch-up amount for people age 50 and older in 2023 is currently $7,500.)
  • Starting in 2026,1 if you earn more than $145,000 in the prior calendar year, all catch-up contributions to a workplace plan at age 50 or older will need to be made to a Roth account in after-tax dollars. Individuals earning $145,000 or less, adjusted for inflation going forward, will be exempt from the Roth requirement.
  • IRAs currently have a $1,000 catch-up contribution limit for people age 50 and over. Starting in 2024, that limit will be indexed to inflation, meaning it could increase every year, based on federally determined cost-of-living increases.