The Secure 2.0 Act of 2022 expands on the original SECURE Act of 2019, introducing 92 new provisions to enhance retirement savings opportunities, boost business incentives, and offer greater flexibility for savers.<\/p>\n
Stay ahead by understanding the final regulations issued by the IRS earlier this year to the Secure (Setting Every Community Up for Retirement) Act 2.0. These changes to employer-sponsored retirement plans could impact your company.<\/p>\n
Necessary changes in company-sponsored retirement plans must be made before 1\/1\/25 or during 2025. <\/u><\/em><\/p>\n Although the changes may be complex, this guide provides an overview of what small business owners need to watch for in the coming year.<\/p>\n How SECURE 2.0 Act Changes Will Impact Your Business in 2025 Consider working with a strategic business advisor using the list below as a guide to ensure you are not only compliant with all necessary plans, but also can take advantage of those that apply to your company.<\/p>\n The SECURE 2.0 Act requires defined contribution plans created after 12\/29\/2022 to include provisions that would automatically enroll employees once eligible. The initial automatic savings rate must be at least 3% but no more than 10%.<\/p>\n What else does that mean for you? <\/em><\/strong><\/p>\n What You Need to Do:<\/strong><\/p>\n The other 3 items to note under this provision include:\u00a0 <\/strong><\/p>\n Extended Amendment Deadlines<\/strong>: The deadlines for\u00a0adopting plan amendments\u00a0under SECURE 2.0 and related acts have been extended by an additional year. The new deadline for most nongovernmental plans is the end\u00a0 of the first plan year beginning on or after January 1, 2025.\u00a0 Companies who comply with the act in year 2025 have until December 31, 2025 to make the necessary changes to their retirement plan documents.<\/p>\n 2. The Beginning of \u201cStarter K\u201d and Other Contribution Changes:<\/strong><\/p>\n Starter K Plans<\/strong>:\u00a0 Small employers have struggled to justify 401K plans due to the administrative burden and its related cost.\u00a0 The Act introduces a low-deferral, no-match plan that removes much of that burden.\u00a0 If these circumstances fit your company and you have not implemented a different type of retirement plan, you may want to explore offering this new 401K option.\u00a0 \u201cStarter K\u201d plans allow employees to contribute a maximum of $6,000 indexed annually, with a $1,000 catch-up for those 50 or over.\u00a0 Employer match contributions are not allowed.\u00a0 These plans do not require compliance with certain participation and non-discrimination (highly compensated) standards or the related reporting<\/p>\n Catch-up Contributions<\/strong>: The Act introduced a new tier of catch-up contributions for employees aged 60 to 63 that went into effect in 2024.\u00a0 The limit in 2025 increases to $10,000 and is indexed annually for inflation. \u00a0It is important to note that eligible employees who wish to take advantage of this new catch-up contribution and earn more than $145,000 in a calendar year are required<\/em><\/strong> to contribute these catch-up contributions after-tax into a ROTH plan.\u00a0 If your company has employees aged 60-63 who exceed the $145,000 earnings and wish to take advantage of the additional catch-up contributions, you may need to add a ROTH retirement plan to your offered benefits and make sure the related payroll deduction is post-tax, not pre-tax.<\/p>\n RMD\u2019s<\/strong>: The Act significantly changes the limits and rules for required minimum distributions (RMD\u2019s) which are beyond the scope of this newsletter.\u00a0 It is prudent for every company who has employees aged 70 or older to work with human resources and the retirement plan administrator to communicate the changes to those employees and encourage them to be proactive to review and understand the new rules and how they affect their retirement landscape.<\/p>\n Below is a helpful breakdown of account limits by numbers:<\/u><\/em><\/strong><\/p>\n Starting in 2025, below are the IRA and ROTH account limits:<\/p>\n 401(k) limits:<\/p>\n SIMPLE IRA limits:<\/p>\n 3. Student Loan Matching<\/strong><\/li>\n<\/ul>\n The Act created an added benefit companies can offer to their employees. Plans that began after December 31, 2023, can have retirement plan contributions made by the employer that match an employee\u2019s student loan payments. Please note that when calculating the match, the total of student loan payments and elective deferrals cannot exceed the annual participant contribution limit ($22,500 for 2023). In other words, employers can provide a retirement plan that matches contribution based on an employee\u2019s student loan payments (instead of matching employee retirement contributions).<\/p>\n Example: An employee earns $50,000 annually and pays $500 per month ($6,000 annually \/ 12% of salary) toward student loans.\u00a0 They cannot afford to save for retirement on top of student loan payments. The employer has an existing retirement plan that matches 4% of employee deferrals.\u00a0 If the student loan provision is added to the retirement plan documents,<\/span> the employer can now deposit $2,000 ($50,000 X 4%) in the employee\u2019s retirement account even if employee contributes nothing. \u00a0This student loan match qualifies as a valid business expense treated the same as the other plan match expense for business tax purposes.<\/p>\n 4. More Opportunities for Part-time Work<\/strong><\/p>\n The new Act\u2019s provisions require employers to offer retirement plan benefits to long-time part time workers for plans created after December 31, 2024.\u00a0 Your company\u2019s current retirement plan was created prior to this date but it is recommended that you check with your plan administrator to confirm that it is grandfathered under the pre-SECURE 2.0 Act rules.\u00a0 If your company employs a lot of part time workers and high employee turnover is a detrimental issue, you may want to discuss the pros and cons of adding this benefit with your human resources, plan administrator and business advisor.<\/p>\n Final Thoughts Understanding all the details and ensuring compliance with the SECURE Act 2.0 can feel overwhelming for many business owners. That’s why working with all of your employee compliance team, including partnering with a trusted strategic business advisor and CFO, like B2B CFO, can make a significant difference in how effectively the changes are implemented in your organization. B2B CFO provides the guidance and support you need to stay ahead, putting you in the driver’s seat with the confidence to manage your business’s financial future effectively.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" The Secure 2.0 Act of 2022 expands on the original SECURE Act of 2019, introducing 92 new provisions to enhance retirement savings opportunities, boost business incentives, and offer greater flexibility for savers. Stay ahead by understanding the final regulations issued by the IRS earlier this year to the Secure (Setting Every Community Up for Retirement)…<\/p>\n","protected":false},"author":262,"featured_media":2918,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","cybocfi_hide_featured_image":"","footnotes":""},"categories":[29,22,44],"tags":[120],"class_list":["post-2917","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-b2b-cfo","category-business-advisor","category-business-growth","tag-secure-act-2-0"],"acf":[],"yoast_head":"\n
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\n<\/strong>All business owners reading this article should be aware of 3 final things:<\/p>\n\n