More retirement plan changes are set to take effect on January 1, 2025.

The SECURE Act 2.0 was signed into law 2 years ago but some of its provisions are still being rolled out. (Read previous posts here and here.) The latest rollout has several changes that are geared toward helping more people access and save more through a workplace retirement plan like a 401(k).

Here is a brief overview of some of the latest changes:

Mandatory Auto-Enrollment

Presently, companies can elect to include auto-enrollment in their 401(k). As suggested by the name, this feature automatically enrolls eligible employees into the retirement plan.

Beginning January 1^st, any new plans started since the bill was signed (December 29, 2022) must auto-enroll all eligible employees. Exceptions are companies with fewer than 11 employees or companies less than 3 years old.

This change is expected to add hundreds of thousands of new retirement savers to retirement plans around the country.

Earlier Eligibility for Long-term, Part-time Employees

Until now, part-time employees 21 years old or older working between 500 and 1,000 hours a year had to work for three years to be eligible to join the retirement plan. Beginning in 2025 that is now reduced to two years of consecutive part-time work.

Increased Catch-up Contributions

In a boon to older workers, employees aged 60-63 will now be eligible to contribute an additional $11,250 per year in catch-up contributions to their plan. This is an increase from the current catch-up contribution of $7,500. SIMPLE participants between 60-63 can contribute an additional $5,250.

Auto-Portability of Small Distributions

Currently, small balances up to $7,000 can be cashed out of the plan when an employee terminates employment and if the balance is over $1,000 the distribution is rolled in an IRA.

Starting in 2025, the balance can now be automatically rolled out of the IRA and into a new employer’s plan. Note that Roth IRA balances cannot be rolled into a new employer plan.

For some employers there may be significant administrative changes necessary to comply with these new laws.

Give us a call if you offer a 401(k) or 403(b) plan at your company or non-profit and you’re not sure about these changes. Beacon Wealth Consultants offers faith-based 401(k) and 403(b) plans that can help you provide a plan that helps your employees, creates possible tax advantages for the business and does it all in a way that honors your faith values.

Reference

https://www.planadviser.com/secure-2-0-whats-next/