On December 29, 2022, President Biden signed the Consolidated Appropriations Act of 2023 (the Act) into law. This omnibus bill funds the federal government through the end of the current fiscal year. A number of legislative initiatives were attached to the omnibus funding package, including the retirement reform measures commonly referred to as SECURE 2.0.
SECURE 2.0 is the culmination of congressional efforts in combining three pension reform bills.
A number of provisions in the Act are optional. MSRS, as administrator of the MNDCP, will explore all optional provisions and communicate any enactment.
The following are some of the provisions that affect governmental 457(b) plans like the MNDCP.
Provisions Effective January 1, 2023
SECURE 2.0 increases the required beginning age from age 72 to age 73 in 2023 for 457(b), 403(b) and 401(k) retirement plan participants and IRA owners who turn age 72 on or after January 1, 2023, and age 73 before January 1, 2033.
For employees who turned age 72 before 2023, the required beginning age is still age 72.
Beginning January 1, 2033, the RMD age will increase to age 75.
Prior law imposed an excise tax on a retirement plan participant if the amount distributed to an individual during a taxable year was less than the RMD for that year. The excise tax is equal to 50% of the shortfall.
SECURE 2.0:
- Reduces the excise tax for failure to take RMDs from 50% of the shortfall to 25%.
- Further reduces the excise tax to 10% if the participant corrects the shortfall during a two-year correction window.
Provisions Effective January 1, 2024
Under current law, RMDs are not required for the owner of a Roth IRA. However, RMDs are required for participants who have a Roth account in a 457(b), 403(b) or 401(k) retirement plan.
SECURE 2.0 eliminates the requirement that RMDs be taken from designated Roth accounts under a 457(b), 403(b) or 401(k) retirement plan during the participant's lifetime. RMDs will be calculated only on the participant's pre-tax account balance.
Provisions Effective January 1, 2025
Under current law, employees who have attained age 50 are permitted to make additional catch-up contributions of $7,500 (or $30,500 for 2024) under an employer retirement plan.
SECURE 2.0 increases the catch-up limit for participants age 60, 61, 62 and 63 to the greater of $10,000 (indexed for inflation) or 150% of the catch-up limit (e.g., current limit is $7,500; 150% equals $11,250).
Effective January 1, 2025, the following catch-up limits will apply:
|
|
||
|---|---|---|
Participant Age |
Catch-Up Amount |
2025 Maximum
|
| Under Age 50 | $23,500 | |
| Age 50 & Over | $7,500 | $31,000 |
| Age 60, 61, 62, 63 | $11,250 | $34,750 |
| Catch-Up Provision* | $23,000 | $47,000 |
*Participants must apply for the Catch-Up Provision.
If eligible, the provision allows additional contributions up to twice the
under age 50 contribution limit if within three years of normal retirement age
(the age at which one is eligible for an unreduced pension benefit).
Q. When is the employee's age determined?
A. An employee's age is determined at the close of the calendar year. The increase applies to eligible
employees who would attain age 60 and would not attain age 64 by the close of the calendar year.
For example, an employee turning age 60 in May 2025 will be eligible for the increased contributions
as of January 1, 2025 because they will attain age 60 in 2025. An employee turning age 64 in June
2025 will not be eligible for the increased contributions because they will attain age 64 during 2025.
The standard age 50 & Over contribution limit will apply to this employee.
Q. What happens to the age 60-63 catch-up limit after the participant turns age 64?
A. The contribution limit reverts to the age 50 & Over limit.
Q. Will we need to change how we submit our employee contributions?
A. The process will work the same as it does today with current age 50 & Over contributions, except
those employees turning ages 60-63 will be eligible to contribute more towards the higher limits.
Q. Does MSRS monitor the contribution limits?
A. Yes. If your payroll system does not monitor the limits, MSRS Payroll Support team monitors all MNDCP
contribution limits and works with your payroll department personnel to correct any excess contributions.
Q. How will over-contributions be identified?
A. If an employee contributes over the contribution limits based on their current age, payroll personnel will
continue to receive error and warning codes when they remit their MNDCP contribution files. The MSRS
Payroll Support team also monitors contribution limits and will reach out to employer payroll personnel to
take corrective actions.
Q. What types of plans are affected by this change?
A. Defined contribution plans with elective salary deferrals such as 457(b), 403(b) & 401(k) plans and
SIMPLE plans that allow for age 50 & Over additional contributions.
Note: The special catch-up provision available to 457(b) & 403(b) plans are not impacted by this change.
Provisions Effective January 1, 2026
Overview
Under current law, an employee can choose whether their age 50+ contributions or new age 60-63 contributions to a 457(b), 403(b) or 401(k) retirement plan are made on a pre-tax or Roth basis.
Provision 603 of the SECURE 2.0 Act requires all age-based contributions to 457(b), 403(b) or 401(k) retirement plan be made on a Roth basis for all employees whose wages (as defined for Social Security FICA tax purposes - i.e., Box 3 of form W-2) for the preceding calendar year exceed $150,000 (indexed for inflation).
All employees with wages below $150,000 for the preceding calendar year must be given the option (but are not required) to make age-based contributions on a Roth basis.
Age based catch-up contribution 2026 limits
Additional retirement plan contributions over the standard IRS maximum contribution limit ($24,500)
- Age 50+ - Employees may defer an additional $8,000 (annual limit maximum: $32,500)
- Age 60-63 - Employees may defer an additional $11,250 (annual limit maximum: $35,750)
Roth contributions
Contributions that have already been taxed.
What this means
- Employers who utilize the MNDCP must allow Roth after-tax contributions for all employees after January 1, 2026
- In 2026, if an employee age 50+ exceeded the compensation threshold ($150,000) in the prior year and wishes to make age based contributions to their retirement plan, they must be made on a Roth after-tax basis.
- Employer payroll departments should work with their payroll providers and third party administrators to ensure contributions made above the standard IRS maximum contribution limit for age-based contributions are submitted as Roth after-tax.
- On an annual basis, we recommend you provide Voya a Mandatory Roth Indicator (MRC) that details those employees who exceeded the prior-year compensation threshold ($150,000 in FICA compensation in 2025). With that information on file, Voya can provide meaningful warnings to your payroll department/provider. These warnings are intended to prevent and/or alert payroll representatives about instances where additional contributions need to be made as Roth.
Employer Job Aid
For more information on this mandatory provision of the SECURE 2.0 Act.
Instructions
Provide Voya with a Mandatory Roth Indicator (MRC) for impacted employees.
Employee Letter
For those impacted employees that you have identified with a Mandatory Roth Indicator (MRC), MSRS will send the attached sample letter informing them of this new contribution requirement.
Feel free to modify the letter and use as well.
Training
12-4-2025 Webinar Presentation
Pre-recorded 12-4-2025 Webinar
Past Communications
Optional Plan Provisions
Under prior law, a deferral change made by a participant in a governmental 457(b) plan did not take affect until the month following the month the deferral was requested.
SECURE 2.0 eliminates the first day of the month rule. Deferral elections can be made at any time (as with 401(k) & 403(b) plans).
Effective April 1, 2023, MSRS has adopted this provision. Employers may now remit MNDCP contributions as soon as administratively practicable.
Please See Sections 2.05, 2.08 and 2.12 of the MNDCP Plan Document.
Under current law, plan sponsors are not permitted to provide employer matching contributions in their 457(b), 403(b) and 401(k), retirement plans on a Roth basis. Matching contributions must be on a pretax basis only.
SECURE 2.0 allows retirement to provide participants with the option of receiving matching contributions on a Roth basis.
Effective whenever a plan so adopts the provision.