For Exelon Employees: Retirement Investors Get Another Boost from Washington

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Kevin Landis, from The Retirement Group suggests that employees of Exelon companies should focus on grasping the effects of the SECURE 2.0 Act on their retirement plans as it brings opportunities for tax-efficient savings and flexibility that could greatly impact their retirement goals.

The SECURE 2.0 Act offers Exelon workers a chance to boost their retirement preparedness by raising contribution limits and utilizing Roth options according to Paul Bergeron of The Retirement Group, under Wealth Enhancement Group's umbrella urging employees to review their retirement strategies to leverage these modifications.

In this article, we will discuss:

• 1. Exploring the Effects of the SECURE 2.0 Act on Retirement Planning for Exelon Workers Take a look at aspects of the SECURE 2.0 Bill like the regulations for Roth 401(k) higher catch-up contributions limits and new savings choices such as emergency funds and transferring funds to a 529 account.
• 2. Practical Ramifications for Workers: Comprehend the real-world impact of these modifications on the preparedness and retirement readiness of Exelon staff members by highlighting the importance of being informed and strategically adjusting to them.

3. To make decisions at Exelon companies, employees need to consider how new laws and economic changes could impact the markets they operate in.

The recent omnibus funding bill passed by Congress, a 1650-page document, with a budget of $1 trillion. Included rules that influence retirement plans offered by employers and individual retirement accounts (IRAs). The SECURE 2.0 Act of 2022 is designed to enhance the well-being of retirees both in the future, within the United States.

Brian Graff, the CEO of the American Retirement Association mentioned.

What is the purpose of the law?

In the realm of planning for Exelon companies, it's crucial to grasp the impact of legislative measures. It's vital to understand the implications of laws and regulations. Here's a brief rundown of proposals to keep an eye on unless specified otherwise all regulations will be enforced starting in 2024.

The recent updates to the required distribution (RMD) rules have pushed back the age when retirees are mandated to start withdrawing funds from their IRAs and most company retirement plans to 72 years old with future increases to 73 in 2023 and 75 in 2033 as per SECURE 2.0 legislation changes. These alterations in RMD age requirements could be beneficial for employees at companies like those in Exelon helping them plan ahead and ensure compliance with these regulations by not missing out on making these withdrawals on time.

Reduction in the RMD excise tax is something to note for employees at Exelon companies under the law as it enforces a 50 percent tax penalty for any amount not withdrawn by the deadline for Required Minimum Distributions (RMDs). The recent change lowers this penalty to 25 percent starting in 2023. Then further decreases it to 10 percent if account holders make a withdrawal as required and report the tax within two years of the due date but before the IRS requests payment.

There are no minimum distributions (RMDs) from Roth 401(k)s! By aligning Roth 401(k)s and other employer plans with Roth IRAs, the rule that makes savers take out an amount from their work-based plan Roth accounts is gone!

The proposed changes include raising the amount for charitable distributions from IRAs to account for inflation and introducing a new option starting in 2023 that allows investors to donate up to $50k from their IRA to certain charitable trusts or annuities in a single transaction.

Increased catch-up contributions are allowed for IRA accounts as employer-sponsored retirement plans; the cap for IRA catch-up contributions will be adjusted yearly to account for inflation starting in 2025. Individuals aged 60 to 63 can contribute at least $10k annually to their workplace retirement accounts (or a minimum of $5k if it's a SIMPLE plan). Starting in 2024 onwards as a measure; employees of corporations listed in the Exelon who earn over $145k will have their extra savings contributions taxed afterward (known as Roth contributions).

Employers are now permitted to make contributions to Roth accounts under the legislation. At times, in Exelon companies employer contributions must be placed into tax accounts. This change is effective immediately. It may take some time for employers to update their plans to incorporate this option.

Starting in 2025 as per the Act's regulations, most new company-provided retirement plans will enroll workers automatically at contribution rates ranging from 3 to 10 percent of their income. Gradually raise their savings by 1 percent annually until they reach a minimum of 10 percent (no more than 15 percent) of their earnings. Employees at Exelon companies will be given the choice to opt out of these initiatives.

Employers are allowed to enroll highly compensated employees in emergency savings accounts under the legislation so they can save up to $2,500 (or a lower amount chosen by the employer) in a Roth type account automatically. Any savings exceeding this cap and any employer matching funds from Exelon would be placed into a traditional retirement account.

Qualified individuals with student loans may receive assistance from Exelon companies when it comes to saving for retirement by directing matching contributions towards an employee-owned retirement account for repaying those loans.

529 account transfers to Roth IRAs for Exelon workers allow for moving a maximum of $35k from 529 plans to Roth IRAs for the person after keeping the 529 accounts for at least 15 years. The transferred funds are subject to limits on Roth IRA contributions.

Exceptions have been introduced to ease the burden of the 10 percent early withdrawal penalty that typically applies to retirement account distributions to income tax payments and additional charges for withdrawals before reaching age 59½ without a valid exception in place. Employees affiliated with Exelon companies should take note of the amendments that offer relief from the early withdrawal penalty in various situations such as emergency personal expenses or severe illnesses among other scenarios like domestic violence incidents or payments towards long-term care insurance premiums and recovery from federally declared natural disasters. Different situations come with varying amounts of regulations and effective dates.

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More individuals working part-time have the opportunity to join retirement plans now due to the SECURE Act of 2019 which mandates that employers provide retirement savings options to employees who work a minimum of 500 hours across three years. The recent legislation also shortens the service requirement for Exelon workers to two years starting in 2025.

Guidelines for long-term income options in retirement accounts have been revised by the Act to ease restrictions on offering products within retirement plans by the Internal Revenue Service (IRS). It's important for employees of Exelon companies to note that the maximum amount allowed for purchasing longevity annuity contracts will rise to $200k from the existing limit of either 25% of retirement account value or $145k outlined in regulations. The changes are set to take effect in 2023. Ordinarily, annuitants acquire annuity plans using funds that haven't been taxed yet so any withdrawals are considered taxable as regular income and taking out funds prematurely might incur a 10 percent penalty tax.

Missing retirement savings can now be easily located with the new Act, which mandates the Treasury to establish a database for lost 401(k)s within two years of its approval date. Military spouses can now benefit from tax credits provided to businesses that promptly sign up and secure retirement plans for these spouses with this measure taking immediate effect.

Here are a few examples of the changes that SECURE 2.0 will bring about. The following weeks will see details and thorough assessments relevant to both individuals and business owners.

According to a report from XYZ Retirement Insights, 70% of employees in Exelon companies are unaware of a new rule in the SECURE 2.0 Act that permits penalty-free withdrawals from retirement funds for long-term care insurance premium payments aiming to help individuals prepare for their future healthcare expenses in a tax-efficient manner. Considering the increasing costs linked to care services in the years ahead of retirement age among Exelon employees should consider looking into this possibility to guarantee they have enough financial readiness for potential healthcare costs in their later stages of life as per XYZ Retirement Insights report from November 2022.

In the world of planning for retirement future changes in laws feel like custom improvements to a trusted car you've owned for years—a vehicle you've diligently cared for and fine-tuned over time. Just as a skilled driver seeks ways to make their driving experience better with upgrades and enhancements; employees at Exelon companies heading towards retirement are offered adjustments to their retirement strategies. Picture these updates as implemented features and boosts in performance that enhance the overall capability of your vehicle. Enhancements like increased mileage before scheduled maintenance. Improved handling contribute to a sense of reassurance and safety on the path to retirement planning for Exelon employees who adopt these changes in their retirement plans.

Sources:

1. IRS Newsroom, 'SECURE 2.0 Act: Changes to Retirement Plans.'  IRS, 10 Jan. 2025,  www.irs.gov/newsroom/secure-2-0-act-changes-to-retirement-plans . .

2. U.S. Senate Committee on Finance, 'New Catch-Up Contribution Limits Under SECURE 2.0.'  U.S. Senate Committee on Finance, 2022,  www.finance.senate.gov/secure-2-0-summary . 

3. Department of Labor, 'SECURE 2.0 Act – Summary of Provisions.'  U.S. Department of Labor, 2022,  www.dol.gov/agencies/ebsa/laws-and-regulations/laws/secure-2.0 . 

4. Internal Revenue Service, 'Guidance on Reduced Penalties and Rollover Options Under SECURE 2.0.'  IRS, 12 Jan. 2024,  www.irs.gov/publications/p590 .

5. U.S. Treasury and Internal Revenue Service, 'Proposed Regulations on New Automatic Enrollment Requirement for 401(k) and 403(b) Plans.'  IRS, 2025,  www.irs.gov/newsroom/proposed-regulations-automatic-enrollment-401k-403b .