Beginning in 2024, employers and plan sponsors will need to implement new minimum eligibility rules, enacted by the SECURE and SECURE 2.0 Acts, that significantly expand eligibility for long-term, part-time employees to participate in employer-sponsored retirement plans.
The new rules require that employers who maintain such plans provide employees who work at least 500 hours for three consecutive years (reduced to two in 2025), and are at least age 21, the opportunity to make elective deferrals under their 401(k) plans beginning in 2024 and their 403(b) plans beginning in 2025. This change has generated numerous questions about what employers need to do to comply.
The Internal Revenue Service (IRS) recently issued new guidance clarifying key aspects of the broadened retirement plan eligibility rule for long-term, part-time employees under the SECURE 2.0 Act. However, with the new rule effective for 401(k) plans beginning January 1, 2024, the guidance leaves employers and plan sponsors very little time to make changes to how their human resources information system providers and recordkeepers currently track hours for this purpose. As a result, it is imperative that employers review their existing eligibility-tracking processes as soon as possible to determine if changes are needed.
The Internal Revenue Service recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2024. Certain health and welfare plan limits have not yet been released.
Most of the dollar limits that are subject to adjustment for cost-of-living increases will increase for 2024. The Social Security Administration released separate adjustment amounts.
The Internal Revenue Service (IRS) recently opened a new determination letter approval program for 403(b) retirement plans—commonly used by nonprofit organizations—which allows sponsors of certain individually designed plans to apply for a favorable determination letter. Long available to 401(k) retirement plan sponsors, determination letters can provide sponsors with advance assurance from the IRS that plans are compliant with the Internal Revenue Code. Plan sponsors of eligible 403(b) programs should take advantage of this new opportunity to submit a determination letter application to the IRS.
In December 2022, Congress enacted groundbreaking legislation as part of the SECURE 2.0 Act codifying an opportunity for employers to provide matching contributions within a tax-qualified retirement plan based on their employees’ qualified student loan payments outside the plan. This On the Subject discusses the SECURE 2.0 student loan benefit and other employer options for providing tax-advantaged benefits to employees based on student loan payments. It also examines the open questions and current implementation challenges for sponsors of 401(k) and 403(b) plans hoping to implement the student loan benefit.
Student loan debt is set once again to impact millions of American workers. Fortunately, starting next year, employers will have new ways to help employees navigate student loan debt. Provisions of the SECURE 2.0 Act will allow employers to provide employer-matching contributions based on their employees’ qualified student loan repayments outside the plan.
In this webinar, McDermott’s Jeffrey M. Holdvogt and Teal N. Trujillo were joined by Tom Robertson C(k)P® of Graystone Consulting for a discussion exploring how organizations can provide this exciting new benefit to their workforces and leverage this important tool to increase employee satisfaction and retention.
Topics included:
Reasons why your organization should consider student loan debt/repayment benefits
Options available to employers to provide tax-advantaged benefits related to student loan debt and repayment
Key aspects of the SECURE 2.0 Act related to student loan repayment benefits as part of an employee retirement plan
Questions, challenges and tips for employers implementing a SECURE 2.0 student loan benefit in their retirement plans
Following the US Supreme Court’s rejection of substantial portions of the Biden administration’s plans for student loan debt relief, and with the end of the student loan repayment moratorium in sight, student loan debt is set once again to impact millions of American workers. Fortunately, starting next year, employers will have new ways to help employees navigate student loan debt. Provisions of the SECURE 2.0 Act will allow employers to provide employer-matching contributions based on their employees’ qualified student loan repayments outside the plan.
On September 12, 2023, join McDermott Will & Emery lawyers Jeffrey M. Holdvogt and Teal N. Trujillo as well as Tom Robertson C(k)P® of Graystone Consulting for a live webinar exploring how your organization can provide this exciting new benefit to your workforce and leverage it to increase employee satisfaction and retention.
Covered topics will include:
Reasons why your organization should consider student loan debt/repayment benefits
Options available to employers to provide tax-advantaged benefits related to student loan debt and repayment
Key aspects of the SECURE 2.0 Act related to student loan repayment benefits as part of an employee retirement plan
Questions, challenges and tips for employers implementing a SECURE 2.0 student loan benefit in their retirement plans
On August 25, 2023, the Internal Revenue Service announced an administrative transition period that effectively delays the deadline for adding Roth catch-up contributions under the SECURE 2.0 Act until at least 2026. Specifically, the announcement provides that, until 2026, catch-up contributions will satisfy the requirements under SECURE 2.0, even if the contributions made for high-wage earners (i.e., those making more than $145,000 from their employer in the prior year) are not designated as Roth contributions.
The US Department of the Treasury and the Internal Revenue Service recently issued proposed regulations on the use of forfeitures by tax-qualified retirement plans. The proposed changes provide welcome clarity for plan sponsors but may require revisions to plan administration and legal plan documents.
In an acknowledgment of uncommon market conditions and their corresponding effect on defined benefit pension plan funding, the Pension Benefit Guaranty Corporation (the PBGC) provided a welcome one-time waiver for some underfunded pension plans under Section 4010 of the Employee Retirement Income Security Act (ERISA). However, to qualify for the waiver, pension plan sponsors still need to timely notify the PBGC.
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