SECURE 2.0 and the 401(k) Pension Plan: Required Minimum Distributions

As part of the Consolidated Appropriations Act of 2023, Congress passed legislation—often referred to as “SECURE 2.0”—with a number of provisions affecting retirement plans. One provision changes how required minimum distributions are calculated, starting in 2024, for plan participants with Roth assets.

Federal law requires retirees to take out some of their 401(k) savings as required minimum distributions. SECURE 2.0 makes a change to how much they will need to withdraw if they have made Roth contributions. Beginning January 1, 2024, Roth monies are exempt from the calculation of pre-death required minimum distributions.

NRECA has made the necessary changes to its systems, and no action is required from cooperatives. However, later in 2024, as distributions are calculated and prepared, some participants may see a reduction in the amount of their checks, depending on the proportion of their savings that are Roth assets. This will affect both participants whose first required minimum distribution is in 2024 as well as those who began required distributions in the past.

For those participants who in 2023 who chose to defer their first required minimum distribution payment until April 2024, the 2023 rules (all 401(k) plan assets are part of the calculation) will apply for that first payment only. Subsequent required minimum distributions will follow the new rules that exclude Roth assets.

This change is also noteworthy for participants who seek to minimize distributions. Formerly, they would have needed to roll over Roth assets from a 401(k) into a Roth IRA to keep that money safe from required minimum distributions. Now, they have the option of leaving those in the account. Further detail about this change from a participant point of view will appear in versions of Financial Power accompanying fourth-quarter 401(k) Pension Plan statements.

For questions related to these plan changes, contact your NRECA field representative.