The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 brings significant changes to the financial planning landscape. The SECURE Act 2.0 that passed into law at the end of 2022 has almost 100 separate provisions – and among them are some which affect those with Thrift Savings Plan (TSP) accounts.
On January 23, 2023, the TSP released Bulletin 23-1. Guidance to TSP agencies and service representatives for implementing the provisions of law, regulations, and procedures relating to the TSP is communicated and shared through bulletins. Bulletin 23-1 is focused on two groups: plan participants and payroll offices. By the way, you can subscribe for future bulletins from the TSP electronically via the hotlink provided in this paragraph.
Significant changes for the plan participants occur this year and in the future. One focuses on Required Minimum Distributions (RMDs) and the other is on catch-up contributions.
The starting age for TSP RMDs in 2023 went from age 72 to age 73. In 2033, the starting age will be adjusted to age 75. Roth balances will also no longer be subject to RMDs prior to the participant’s death.
The RMD date changes will mean participants will be able to delay taking distributions from their TSP accounts. Be aware, however, that delaying distributions may mean a larger account balance that will then be subject to future RMD calculations.
Participants no longer have the incentive to move their Roth balances from the TSP to a Roth IRA because of the SECURE Act 2.0 change. Before the change, those with Roth TSP accounts were required to take RMDs. That is not the case with Roth IRAs. The Internal Revenue Service provides an updated link on RMDs and retirement on their Retirement Topic internet site.
On January 1, 2024, those defined by the Act as high-wage earners ($145,000 or more in wages) will only be able to make their catch-up contributions only as Roth contributions. The 2023 wages will be used as the benchmark for the $145,000 amount.
Next year’s choices for Traditional or Roth contribution options and catch-up contributions continue to remain as they are this year for those whose wages in 2023 do not exceed $145,000.
Another change will be that beginning on January 1, 2025, the catch-up contribution limit for participants ages 60-63 will be increased to the greater of $10,000 or 150% of the standard 2024 catch-up contribution limit.