Plan sponsors might know about many provisions in the SECURE 2.0 Act surrounding
Roth 401(k)s. But there are a few provisions to make sure you are up on – and soon –
heading into the new year.
One provision that is complex – and requires attention – has to do with catchup
contributions for high earners (those making $145,000 or more). This provision means
employees who make $145,000 or more in the prior year are identified and then any
catchup contributions must be taxed as Roth contributions. Depending on how you run
your business, plan sponsors might find this to be less than straightforward.
That’s because payroll providers and recordkeeping systems need to be updated to
handle this change and some plan sponsors are concerned it won’t work as planned.
The deadline is looming, as plan sponsors need to figure it out by Jan. 1.
There hasn’t been much guidance issued by the federal government on this provision,
as well.
Plan sponsors and administrators need to be reviewing these changes now and working
with their service providers on compliance and processes – making sure everything
conforms to the regulations. These new catchup rules apply to a decent chunk of the
workforce, especially those 50 and older who need to increase their retirement savings.
For now, sponsors need to think about these things (including Roth 401(k)s):
1. Reviewing the current Roth availability in the plan
2. Implementing a strategy
3. Checking the readiness of your systems
4. Communicating with employees
5. Set up protocols for errors and adjustments
Do you still have questions?
Follow us on LinkedIn and Facebook!
If you have other questions about retirement plan loans, email us or call 937.308.0758.
Recent Comments