Exemption for certain automatic portability transactions – Under current law, an employer is permitted to distribute a participant’s account balance without participant consent if the balance is under $5,000 and the balance is immediately distributable (e.g., after a termination of employment). This provision makes similar changes to the contribution limits for SIMPLE 401(k) plans. An employer with 26 to 100 employees would be permitted to provide higher deferral limits, but only if the employer either provides a 4% of pay matching contribution (up from 3%) or a 3% of pay employer non-elective contribution (up from 2%). Contribution limit for SIMPLE plans – This Act automatically increases the annual deferral limit and the catch-up contribution at age 50 by 10% in the case of an employer with no more than 25 employees. The contribution may not exceed the lesser of up to 10% of compensation or $5,000 (indexed).Īpplicable plans: Simple IRA and Simple 401(k) plans An employer is now permitted to make additional contributions in a uniform manner, to each eligible employee who has at least $5,000 of compensation from the employer for the year. Allow additional non-elective contributions to SIMPLE plans – Current law requires employers with SIMPLE plans to make employer contributions to employees of either a non-elective contribution of 2% of compensation, or a matching contribution equal to the lesser of the employee’s elective deferral contribution or 3% of compensation. They must repay the $1,000 distribution within 3 years or no further emergency distributions are permissible during the 3-year repayment period.Įffective for distributions made after December 31, 2023.Īpplicable plans: 401(a) (except pension plans), 401(k), 403(b), governmental 457(b) plans and traditional IRAs The new law would permit participants to withdraw up to $1,000 in a year from their retirement account to pay for an emergency. Withdrawals for certain emergency expenses – Generally, an additional 10% penalty tax applies to early distributions from tax-preferred retirement accounts unless an exception applies. 
For purposes of the nondiscrimination test applicable to elective contributions, a plan is permitted to test separately the employees who receive matching contributions on student loan repayments.Įffective for contributions made for plan years beginning after December 31, 2023.Īpplicable plans: 401(k), 403(b), governmental 457(b) plans, and SIMPLE IRAs An employer is permitted to match student loan payments under 401(k), 403(b), SIMPLE, and 457(b) plans as if those payments were elective deferrals. Treatment of student loan payments as elective deferrals for purposes of matching contributions – This section allows employees to receive matching contributions on student loan repayments.
This Act allows the limit to be indexed to inflation, meaning it could increase every year, based on federally determined cost-of-living increases.Įffective for taxable years beginning after December 31, 2023.
Indexing IRA catch-up limit – The current limit on IRA contributions is increased by $1,000 for individuals who are age 50 and older.Click here to register for our Secure 2.0 Webinar on Tuesday, February 28, 2023, from 10:00 AM – 11:00 AM PST It’s important for plan sponsors and service providers to become familiar with these provisions so they can plan accordingly.Īlthough this new legislation includes over 90 provisions, the following provides a high-level summary of selected provisions that are effective in 2024. Many of the provisions effective in 2024 will make a profound impact on plan design and how participants will save for the future.
See our prior blog, which focused on the provisions effective in 2023. To help alleviate some of this concern, plan sponsors may want to focus on the provisions that are both mandatory and will be effective within the next 2 years. As the SECURE 2.0 Act makes its way through the headlines, plan sponsors may start to feel overwhelmed by the many provisions contained within this Act.
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