SECURE Act 2.0: Annuities in 401(k)s

SECURE Act 2.0: Annuities in 401(k) Plans

This is our seventh vlog about the changes to retirement plans under the SECURE Act 2.0 which became law in December 2022. You can find all of the other vlogs about other changes on our website. 

Today, we will talk about the annuities in 401(k) plans. It includes a provision that allows employers to more widely offer annuity options within 401(k) plans. 

Before SECURE Act 2.0, employer plans were generally constrained in allowing employees to purchase annuities in their accounts due to the required minimum distribution (RMD) rules. With SECURE Act 2.0, it allows an employer to include annuity options in a plan by exempting certain annuity features from actuarial tests that would otherwise prohibit their use. The new law directs the Internal Revenue Service (IRS) to modify it’s regulations to allow for more relaxed rules around the payment of premiums for an annuity, and how the annuity’s annual payment is considered in the determination of the employee’s RMD. The point of this is to allow employees to have the option of including an annuity in their plan if they want to.

This new law change also includes an increase in Qualified Longevity Annuity Contract (QLAC) Contributions. It was $125,000 but now it is up to $200,000. A retiree is allowed to spend up to $200,000 on a QLAC using their retirement money. The limit will be adjusted for inflation annually. The prior 25% of income limit rule is eliminated which means it is more accessible and easier for retirees to invest in. It becomes an option for anyone with a traditional retirement account to consider whether adding a QLAC might be beneficial.

If you are curious about the idea of utilizing an annuity option within your employer retirement plans, please feel free to contact us anytime to discuss further.

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Adrianna Rocha

Client Relations Representative

240-379-6929 V
240-439-6889 VP
512-379-6909 FAX

Adrianna Rocha joined Kramer Wealth Managers in 2021.

Adrianna is responsible for client experiences and service. As part of the customer service team, she strives to help and provide top-notch service to our clients. As part of her role, she communicates with clients through videophone, schedules client meetings, prepares and processes forms, and gathers information for our advisors.

Adrianna Rocha graduated with a Bachelor of Arts in Communication Studies from Gallaudet University in 2017. Before she joined our team, she worked in the customer service industry for nearly a decade. She excels in human-to-human relations and takes pride in not only her own accomplishments, but her clients’ as well. Adrianna enjoys chatting about her slight obsession with dogs, houseplants, essential oils, and food: especially Mexican food! She is also a proud fur-mama to her beautiful Aussie-mixed pup, Ziva.

Adrianna is not registered with Osaic Wealth.