IRS Guidance Changes SECURE Act 2.0 Effective Dates of Provisions for Workplace Retirement Plans



With the signing into law of the omnibus spending bill that included SECURE Act 2.0 in 2022, businesses and their employees can now capitalize on added incentives related to their retirement plans. The initial Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law in 2019. SECURE 2.0 builds on the initiatives already started to help Americans achieve retirement security and financial wellbeing. Its provisions include:

Eligibility for Long-Time Part-Time Employees
On Jan. 1, 2025, a provision impacting eligibility takes effect that changes the number of years of service to two for long-time part-time employees (along with 500 hours of work in each year) to be able to participate in their employer’s workplace retirement plan.

Eligibility Expansion for Small Businesses to Earn Tax Credit
As of 2023, eligible businesses with 50 or fewer employees can qualify for a credit equal to 100 percent of the administrative costs for establishing a workplace retirement plan. A New Credit for Employer Contribution CostsAlso in 2023, eligible businesses with up to 100 employees might be entitled to a tax credit based on their employee matching or profit-sharing contributions. This credit, which caps at $1,000 per employee, phases down gradually over five (5) years and is subject to further reductions for employers with 51 to 100 employees.

Technical Correction for Small Businesses to Qualify for Startup Credit
If a business offers a retirement plan for the first time by joining a multiple employer plan (MEP) or a pooled employer plan (PEP), they should see if they are eligible for the credit.

Expansion of Auto-Enrollment
SECURE 2.0 requires automatic enrollment for new 401(k) or 403(b) plans beginning in 2025, with some exceptions for businesses with 10 or fewer employees, new businesses less than 3-years-old, churches, and governmental plans. Businesses can integrate automatic enrollment with payroll.

Changes to Benefit a Multigenerational Workplace
Today’s workplace is more generationally diverse than ever. Older employees are working longer, and Millennials make up roughly one-third of the American workforce. SECURE Act 2.0 addresses these age groups.For older employees, the law raised the required minimum distribution (RMD) age from 72 to 73and then to age 75 beginning in 2033. There are also several new catch-up contribution provisions.Part-time workers will now be eligible to contribute to an employer-sponsored retirement plan. The Act requires employers to allow long-term, part-time workers to defer to their 401(k) plans. The law also transforms the current Saver’s Credit with an incentive to save for retirement each year to a Saver’s Match beginning in 2027. The Saver’s Match will be a federal matching contribution deposited to a taxpayer’s IRA or retirement plan.

Student Loan Payment Matching
Starting in 2024, employers can make matching contributions to an employee’s 401(k) for student loan repayment, enabling the employee to pay off their student loan and save for retirement at the same time. Access the full article here.

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Source: Paychex

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