All defined benefit plans (both traditional and cash balance) will need to be completely restated no later than March 31, 2025. We will be reaching out to our current clients in 2023 and 2024 regarding this project. If you are not yet a client of ours and have questions, please contact us for more information. The SECURE Act that was passed in December, 2019 has a major change that will go into effect for all 401(k) plans effective January 1, 2024. This pertains to plans that have a service requirement that would exclude part-time employees. In the event that you have employees who have worked between 500 and 1,000 hours during 2021, 2022 and 2023 they may need to be allowed the ability to make their own 401(k) contributions beginning in 2024. We are working our client and their record keepers to get these changes implemented.
The SECURE 2.0 Act was passed in December 2022 and makes major changes to the operation of retirement plans. Some of those changes go into effect in 2023 but most of the major changes are effective in 2024 or later. Below are some of the major changes that could impact your retirement plans:
Please note that IRS has not provided much guidance on these provisions and we hope that they will in the coming months so that Plan Sponsors can appropriately assess how these changes will affect their plans and their participants.
Annually, the IRS updates the limitations applicable for retirement plans. Please click this link to see current and past limitations.
The SECURE 2.0 Act was passed in December 2022 and makes major changes to the operation of retirement plans. Some of those changes go into effect in 2023 but most of the major changes are effective in 2024 or later. Below are some of the major changes that could impact your retirement plans:
- For individuals who earned more than $145,000 in W-2 wages in the prior year and are age 50 or older who wish to make catchup contributions to their 401(k) plan, the catchup contribution will need to be done on a Roth basis rather than on a pre-tax basis. There has been much publicity of this since it was originally effective in 2024, but on August 25, 2023, IRS delayed this until 2026.
- Starting in 2025, for plans that allow catchup contributions, there will be a higher catchup limit for participants with ages of 60-63.
- The original SECURE Act permitted the retroactive adoption of a new retirement plan as late as the due date of the business tax return (with extension if the return is extended). SECURE 2.0 Act permits amendments increasing benefits to be adopted retroactively as well. This provision goes into effect for amendments adopted in 2025 retroactively back to 2024.
- All 401(k) plans adopted after December 29, 2022 for companies that “regularly” employ more than 10 employees will need to be amended to include Auto-Enrollment and Auto-Escalation for plan years beginning in 2025.
- The original SECURE Act changed the age to start receiving mandatory distributions from plans and IRAs to age 72 from age 70½. SECURE 2.0 Act changes the age to 73 starting in 2023 with gradual increases to age 75 in 2033.
- SECURE 2.0 Act provides significant tax credits for certain companies adopting a defined contribution plan for the first time. The available credits can be used to offset startup costs and employer contributions for up to the first three years of the plan.
Please note that IRS has not provided much guidance on these provisions and we hope that they will in the coming months so that Plan Sponsors can appropriately assess how these changes will affect their plans and their participants.
Annually, the IRS updates the limitations applicable for retirement plans. Please click this link to see current and past limitations.