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Hunter Benefits Consulting Group

SECURE 2.0 FAQ

Setting Every Community Up For Retirement Enhancement (SECURE)

SECURE 2.0 brought a lot of new changes to the retirement world. These changes can be overwhelming for a lot of people. That’s why we created this FAQ page and a free tax credit calculator to help you navigate and leverage this new act.

Tax Credit Calculator

Elements first became available to certain plan sponsors on December 29, 2022.

Setting Every Community Up for Retirement Enhancement

The only thing you have to do now for 2023 is make sure that new RMD distributions are only for 73 year olds.

Yes. An element from 2019’s SECURE 1.0 may apply to you. You may be eligible for a 3-year $500 credit when you add automatic enrollment to the Plan.

Yes. Some of them still do. Following is a list of some of those: 

  • Required for 2023 – The Minimum Required Distribution age is raised to age 73. 
  • Optional for 2023 – Qualified Birth and Adoption Distribution (QBAD) – Guidance was provided for this option introduced with Secure 1.0. A maximum $5,000 distribution is allowed up to 1 year after a child is born or adopted. These funds must be repaid to the Plan within 3 years. 
  • Required for 2024 – Employees making over $145,000 (indexed) in the prior year must have their catch up contributions be Roth. If your plan does not currently have a Roth provision, you will be provided with an amendment by the end of 2023. 
  • Required for 2024 – Long Term Part-Time workers who work at least 500 hours per year for three years (2021, 2022 and 2023) will be eligible to make employee deferrals to an employer’s 401(k) plan. 
  • Required for 2025 – If you have greater than 9 additional employees not eligible for the plan and the  401(k) Plan was adopted after December 29, 2022, your plan must have automatic enrollment with an automatic increase component. 
  • Required for 2025 – Long Term Part-Time workers who work at least 500 hours per year for two years since 2021 will be eligible to make employee deferrals to an employer’s 401(k) plan. 
  • Optional for 2025 – If you have fewer than 9 additional employees not eligible for the plan and your 401(k) Plan was adopted after December 29, 2022, your plan may have automatic enrollment with an automatic increase component. 
  • Optional for 2025 – The catch up contribution amount will be increased for those who are 60 to 63 years old (born in 1965 or after). 

As of March 2023, there are 2 reasons why it’s not a viable option right now. 1) The IRS has not provided any guidance as to how any related taxes are to be handled, and 2) We have not been notified by any of the recordkeepers that they have updated their systems to allow for this kind of deposit. In practice, it may not be available until Q4 2022.

Yes.  In Plan Roth Conversions have been available since 2012 and allow for any employee to convert any amount of vested pre-tax money (regardless of the deposit source) to Roth. The process for this is well established, has IRS guidance and is available with most recordkeepers.

The general consensus is that disqualifies you from both of those credits. 

We can do better than that. Here is the link for our calculator. Feel free to see how the different employee counts have an effect on the total credit amount available.

No. They’ve not even provided the necessary guidance yet from 2019’s SECURE 1.0. Industry leaders have had conversations with the IRS after the Act was enacted, and the IRS would not comment at all on what provisions would receive guidance and when. However, we will be able to guide you on what the best practices most likely will be, and on what the IRS will accept as a good faith practice.

Yes, here is a link to an in-depth page.

No. There was a technical error in the Act. The IRS has stated that there will be Roth contributions in 2024 and beyond.

If an employee has worked at least 500 hours in each of 2021, 2022 and 2023 they are eligible to defer starting in 2024. Employers may exclude them from any employer contributions and they are not included in any testing. They are, however, full participants (even without an account balance) in every other sense of the word. They are to receive all the other notices and announcements all other participants receive. One area not yet addressed by the IRS is the impact on a class of employees that was otherwise excluded from plan coverage.

Starting with 2023, if an employee has worked at least 500 hours in each of 2023 and 2024, they are eligible to defer starting in 2025. Employers may exclude them from any employer contributions and they are not included in any testing. They are, however, full participants (even without an account balance) in every other sense of the word. They are to receive all the other notices and announcements all other participants receive. One area not yet addressed by the IRS is the impact on a class of employees that was otherwise excluded from plan coverage.

There are 2 changes coming for the catch-up rules. The first is an optional change beginning in 2025 – The catch-up contribution amount will be increased for those who are 60 to 63 years old (born in 1965 or after). The second is a required change beginning in 2026 – Employees making over $145,000 (indexed) in the prior year must have their catch-up contributions be Roth.

If your 401(k) or 403(b) Plan was adopted on or after December 29, 2022, your plan must have automatic enrollment with an automatic increase component. If your plan does not already have this feature, you may be eligible for the $500 credit to amend it into the plan. 

Here is the link for Form 8881 and its instructions. For more information, please refer to your tax professional.

Need more clarification? Just go to our contact page and we will answer any questions you may have.

 

*The information provided is for general information only and not specific legal or tax advice. The information is not intended to, nor shall it be deemed to, constitute or provide legal or tax advice or counsel. Please consult with your tax professional to determine your specific tax situation.