SECURE Act 2.0 brought several significant changes for 401(k) plans in 2024, has your organization made adjustments to accommodate them? From new rollover options to enhanced protections for individuals facing emergencies, these updates were designed to provide your plan participants with greater flexibility in planning for retirement. If you haven’t already developed a plan to provide the following key provisions, this is your opportunity to do so.
Roth 401(k) and Roth 403(b) Plans Not Subject to RMDs
Starting in 2024, Roth 401(k) and Roth 403(b) accounts will no longer be subject to required minimum distributions (RMDs) during the participant’s lifetime. This change aligns the RMD rules for Roth 401(k)s and 403(b)s with those for Roth IRAs, extending the pre-death RMD exemption to these accounts.
Student Loan Matching for Retirement Plans
In 2024, employers can match employee student loan payments with contributions to 401(k), 403(b), or SIMPLE IRA plans. This provision helps your employees pay off student loans while simultaneously saving for retirement instead of having to choose between the two. In a letter responding to the Department of the Treasury and the Internal Revenue Service’s (IRS) call for recommended topics for their 2024-2025 Priority Guidance Plan, the ERISA Industry Committee (ERIC) requesting additional clarity on the “reasonable procedures” plan sponsors can establish for participants to claim the match.
Domestic Abuse Victim and Emergency Withdrawals
Participants can withdraw up to $1,000 annually from their retirement savings for personal or family emergencies without penalty. Participants under the age of 59½ victimized by domestic abuse can withdraw up to $10,000 from their IRA or 401(k) without paying the 10% penalty tax.
Emergency Savings Account Automatic Enrollment
Employers can offer automatic enrollment in emergency savings accounts within retirement plans starting in 2024. Participants can make after-tax Roth contributions to these accounts, maxing out at $2,500. Pension-linked emergency savings accounts (PLESA) are available to participants who aren’t highly compensated individuals. Withdrawals can be made at least once per month for any reason.
Surviving Spouse Elections
SECURE Act 2.0 allows a surviving spouse to elect to be treated as the deceased participant for RMD purposes. This option allows the surviving spouse to defer RMDs until they reach the appropriate RMD age, allowing for more tax-deferred growth. Previously, the surviving spouse could either roll over the IRA into their own or remain a beneficiary with inherited IRA treatment.
Understanding these provisions and creating a plan to implement them for your plan participants should be a high priority moving into the latter half of 2024 and into 2025. Be sure to communicate regularly with participants so they’re aware of the benefits available to them through the SECURE Act 2.0.
For more information on how our 401(k) audit team can help, request a free consultation below to discuss your unique 401(k) audit needs.
