There are some significant changes happening with retirement plans, largely due to the SECURE Act 2.0. Here are some to be aware of. Some may require plan amendments and some are benefits that you could share with your employees.
Roth Plan Changes:
- Over age 50 Catch-Up Contributions for those with income over $145,000 must go into a Roth 403(b), 457(b), 401(k) beginning 2026. In the meantime, plans could work with their TPAs to ensure the plan document allows for the Roth provision. Even though this was to start in 2024, the IRS has delayed the effective date of this provision until 2026.
- Required Minimum Distributions (RMDs) Eliminated. Starting in 2024 there are no more designated Roth RMDs from Roth 403(b), Roth 401(k) or Roth 457(b).
Roth SEP and SIMPLE IRAs
- Before SECURE 2.0, contributions to SEP and SIMPLE IRAs could only be made on a pre-tax basis (traditional). Now, employers can allow participants to designate contributions as Roth contributions. Roth SEP and SIMPLE IRA piqued a lot of interest from the public, but without much needed guidance from the IRS, we are in a holding pattern with how to implement these.
New 529 Rollover Option:
- 529 rollover to Roth IRA: This provision allows for limited tax- and penalty-free rollovers from 529 accounts to Roth IRAs. Starting in 2024, beneficiaries of 529 accounts would be able to roll over up to $35,000 (lifetime limit) to their Roth IRA (subject to annual Roth IRA contribution limits, i.e. $6,500) if the 529 account has been open for more than 15 years. The beneficiary of the 529 plan and the Roth IRA must be the same person.
Deadlines To Pay Attention To:
Annual Contribution Deadlines:
December 31st: This is the BIG one. Employees need to make their Roth 403(b) contributions by the end of the calendar year. This deadline applies to both regular contributions and any catch-up contributions for those aged 50 and over.
Plan Amendment Deadlines:
These are tricky! Deadlines for amending plan documents to comply with new legislation or regulations can be complex. They often depend on the specific legislation and the type of plan. The SECURE Act 2.0 has various deadlines for plan amendments, some extending to 2026 or later.
Employer Matching Contribution Deadlines:
This varies! Unlike employee contribution deadlines, employer matching contributions might have different deadlines depending on the plan and the employer's policies. Some employers might match contributions throughout the year, while others might have a specific deadline. Employers need to clearly communicate their matching contribution deadlines to employees to avoid confusion and missed opportunities.
Send out reminders to employees about upcoming deadlines, provide clear information about plan rules and deadlines, and offer resources or support to help employees make informed decisions about their retirement savings.
CONTACT US with any questions you may have about your plan.
Sources:
https://www.ntsa-net.org/news/2023/8/irs-grants-two-year-delay-roth-catch-requirements/
https://my529.org/secure-act-2-0/