![]() 7 The loan repayment amount is treated as if the participant had deferred the amount under the plan, even though no deferral amount is actually withheld from the participant’s eligible compensation or contributed to the plan by the participant. Starting in 2024, employers may make a matching contribution to a 401(k), 403(b), 457(b) or SIMPLE IRA plans, based on the amount of a qualified student loan repayment made by a participant to a lender during the applicable period. Student loan repayments may be treated as elective deferrals for matching purposes The additional credit does not apply to defined benefit plans and in determining the credit, the employer cannot take into account contributions made for employees who earn more than $100,000 (indexed). This additional credit applies to employers with up to 50 employees and is phased out for employers with between 51 and 100 employees. 6 The Act also provides for an additional credit of up to $1,000 per employee. The existing tax credit for qualified plan start-up costs for employers with no more than 50 employees is increased from 50% to 100% of such costs, starting with the 2023 tax year. Expanded qualified plan start-up credit for small employers In order to allow employers and plan providers a transition period to develop automatic enrollment procedures, the provision is generally effective for plan years beginning after Dec. Employers that adopt an existing multiple employer plan after the enactment date are not entitled to rely on that plan’s grandfathered status and will need to comply with applicable automatic enrollment rules. 29, 2022 (date of enactment) savings incentive match plan (SIMPLE), governmental and church plans plans of employers with fewer than 10 employees and plans of employers in existence for less than three years. After deferral, participants must have the right to withdraw such automatic contributions from the plan within 90 days of the first contribution.Īutomatic contribution arrangements are no longer voluntary, except for 401(k) and 403(b) plans established prior to Dec. Plan sponsors are required to include an “eligible automatic contribution arrangement” (EACA) in new 401(k) or 403(b) plans established after the date of enactment, 5 including a contribution rate during the first year of participation of not less than 3% or greater than 10% unless the participant opts out, with an automatic 1% annual deferral increase up to a maximum of 15% (10% for 401(k) safe harbor plans). Automatic enrollment mandatory for new 401(k) and 403(b) plans Some of the key provisions affecting employers are described below. Some of the Act’s provisions have been under discussion for years, while others seem to be trial balloons requiring the various regulatory agencies to monitor and report on their usefulness to Congress. In addition, the Act may be read to expand coverage to more employees, provide incentives for more employer contributions, and ease administrative burdens associated with nondiscrimination testing, plan enrollment, mandatory participant disclosures, correction of plan qualification failures and deadlines for adopting plan amendments under prior legislation. ![]() 3 The Act also provides tax credits and streamlines administration as an incentive for small businesses without a retirement plan to adopt one. 2 For example, the Act attempts to encourage participants to save more on a tax-favored basis by raising the otherwise applicable annual contribution limits for qualified retirement plans and allowing participants greater access to their retirement savings in the event of an emergency without application of the 10% early distribution penalty. The Act generally focuses on increasing retirement savings for employees and individual retirement account (IRA) owners. 29, 2022, as part of the Consolidated Appropriations Act, 2023, 1 is one of the most comprehensive pieces of retirement legislation in decades. The SECURE 2.0 Act of 2022 (the Act), enacted on Dec. Key takeaways for employers under the SECURE 2.0 Act of 2022 29, 2022, significantly changes the complex tax rules applicable to employer-provided retirement plans, including opportunities and burdens for plan sponsors.
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