By Ravann Sowa, Senior Manager, CPA at Matthews, Carter & Boyce, P.C.
SECURE 2.0 Act of 2022 (SECURE 2.0) was signed into law on December 29, 2022 and expanded on the Setting Every Community Up for Retirement Enhancement Act of 2019. There were many key features that were effective for 2024. However, did you know there are other features that are effective for 2025 and beyond? As you head into 2025, you should consider the following key features.
- Sections 401(k) and 403(b) plans must include an automatic enrollment feature for eligible employees with a default elective deferral rate between 3-10%.
- If you have a new plan that was adopted after December 29, 2022, you must generally provide (there are certain exceptions) for automatic escalation of contributions of 1% per year up to at least 10% but no more than 15%. However, employees do have the option to opt out of the automatic enrollment and escalation features.
- Part time employees who complete two consecutive years of service working 500 hours each year are eligible to participate in their Company’s 401(k) and 403(b) plans.
- Employees who are ages 60-63 will be able to make additional catch-up contributions up to the greater of $10,000 or 150% of the regular catch-up limit. For SIMPLE plans, the limit is the greater of $5,000 or 150% of the regular catch-up limit.
- Employers will be able to provide participants the option of receiving vested matching contributions and non-elective contributions on a Roth basis.
There are numerous other features of SECURE 2.0 such as required minimum distributions, emergency savings and distribution provisions, penalty free early withdrawals, help with student loans, credits for small business retirement plans, and facilitation of error corrections. Please consult qualified legal and financial experts to learn more about SECURE 2.0 and the impact it has on your plan documents and operations in 2025.
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