The Biggest Changes to Your 401(k): Biden Administration Changes

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By Jordan Martinez

A bill signed into law by President Biden expands access to retirement plans, establishes new regulations for 529 accounts, and includes a student loan payment matching program.

The year 2022 has been a difficult one for those saving for retirement, but new laws passed in December of 2022 may provide some relief in 2023. The legislation, included in an omnibus spending bill signed by President Joe Biden, aims to increase access to retirement plans, however, it has also been met with criticism for primarily benefiting high-income individuals and not adequately addressing the retirement crisis facing the nation.

Politics –

Despite facing significant challenges, such as a significant portion of the population having no retirement savings, the new legislation is a step in the right direction.

The following are some of the changes that financial advisers and retirement experts believe will have the most impact and relevance for those saving for retirement today:

Student Loan Matching 

Starting in 2024, employers will be allowed to treat employee student loan payments as contributions to workplace retirement savings plans. This means that these payments will be eligible for employer matching contributions, providing a head start for younger individuals who may have delayed saving for retirement.

Business –

It is worth noting that currently, student loan payments are temporarily halted due to a Supreme Court review of President Biden’s plan to cancel up to $20,000 in debt per borrower.


One of the more significant changes is the option to transfer funds from a 529 college savings plan to a Roth IRA, as noted by Tim Steffen, the Director of Tax Planning at Baird Private Wealth Management. Roth IRA’s are funded by post-tax dollars, which then grow tax-free.

Starting in 2024, individuals who are beneficiaries of a 529 plan and have remaining funds due to, for example, receiving more scholarships than anticipated, will be able to transfer some of the leftover funds into a Roth IRA without incurring the standard 10% penalty for withdrawing money for non-educational expenses.

However, there are some limitations to this change. The 529 account must be at least 15 years old, and only the original contributions can be moved over to a Roth IRA, not any growth from the past five years. Additionally, the annual contribution limit for Roth IRA remains $6,500 in 2023, and the lifetime cap for 529 rollovers is $35,000.

This change is beneficial for those who have been hesitant to save for college in a 529 plan due to the possibility that their child may not attend college.

Emergency Savings

Currently, employees who require access to their 401(k) funds before reaching the age of 59 1/2, for emergency expenses, can make hardship withdrawals. However, in most cases, these withdrawals are subject to a 10% penalty, income tax, and the individual is not able to re-contribute the withdrawn funds to the account. In recent years, hardship withdrawals have been increasing.

Product Reviews –

In an effort to reduce the number of hardship withdrawals, starting in 2024, employers will be permitted to provide emergency savings accounts in addition to retirement plans.

These accounts will have a maximum limit of $2,500, or an employer may set a lower limit. An employee can make one penalty-free withdrawal of up to $1,000 per year, and must repay the funds within a period of 3 years. An employee will not be able to make any additional withdrawals during this 3-year period unless the funds have been repaid.