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Decoding SECURE 2.0 Guidance

Decoding SECURE 2.0 Guidance

March 25, 2024

Decoding SECURE 2.0 Guidance 

An overview of IRS guidance exploring notice 2024-02 

The SECURE Act introduced 90+ provisions impacting retirement plans, leading to significant changes in the industry. However, amid these changes, it was clear more guidance was needed for some provisions, as some instructions were straightforward while others were unclear. 

To address this, the IRS has been providing additional guidance, including the recent Notice 2024-02. Dubbed the "Grab Bag" notice, it addresses several SECURE 2.0 provisions derived from common questions. The notice offers guidance on 12 sections, and below is a high-level overview of each.  

  • Auto-enrollment mandate for new plans: SECURE 2.0 requires new 401(k) plans set up after December 29, 2022, to enroll employees automatically by 2025, with guidelines clarifying when a plan is established, rules for merging or spinning off plans, exceptions for older plans, and coverage for certain types of plans like Starter 401(k) and Safe Harbor 403(b). 
  • Small business tax credits:SECURE 2.0 increases tax credits for new small business retirement plans. Credits cover startup costs and employer contributions, with eligibility based on establishment date and employee count. 
  • Military spouse credit: SECURE 2.0 provides a tax credit for employers offering retirement benefits to military spouses, with guidance on eligibility and claiming the credit. 
  • Financial incentives for participation: SECURE 2.0 allows plan sponsors to offer small financial rewards, up to $250, to non-participating employees, subject to regular tax rules. 
  • Increased SIMPLE limits: SECURE 2.0 raises deferral limits for SIMPLE IRAs and SIMPLE 401(k) plans under certain conditions. 
  • Terminal illness distributions: SECURE 2.0 introduces an exception to the 10% early distribution tax for terminally ill individuals. 
  • Mid-year termination of SIMPLE: SECURE 2.0 permits mid-year termination of a SIMPLE plan if replaced by a safe harbor 401(k) plan. 
  • Cash balance plan accrual rule: SECURE 2.0 changes how cash balance plans comply with the accrual rule. 
  • Self-correction for automatic enrollment: SECURE 2.0 offers correction relief for automatic enrollment plans after December 31, 2023. 
  • Amendment deadline: The notice offers relief concerning the deadline for adopting amendments related to SECURE 2.0. 
  • Roth SIMPLE or SEP IRA: SECURE 2.0 allows employees in SIMPLE IRA plans or SEP arrangements to choose a Roth IRA for contributions. 
  • Roth employer contributions: SECURE 2.0 enabled employees to opt for employer matching or nonelective contributions to be made on a Roth basis. Guidelines permit plans to adopt Roth contributions independently and specify rules for elections, vesting, income inclusion, exclusion from FICA and FUTA wages, reporting methods, and compensation definitions.  
     

The SECURE Act stands as a monumental milestone in the retirement industry, representing the largest legislative overhaul in decades. As industry professionals unite to navigate its complexities and adapt to its evolving landscape, we are committed to providing you with regular updates to ensure you stay informed every step of the way. Our goal is to empower not overwhelm, if you have any questions about SECURE Act or compliance, please contact us.  

 

Matthew Daniels, Financial Advisor 

Summit Financial Group, Inc.                                                         

101 Commerce Blvd. Suite A 

Loveland, Oh. 45140 

513-686-2874 

mdaniels@summitfn.com 

https://www.summitohio.com/ 

 

Investment Advisor Representative offering advisory services and securities through Cetera Advisor Networks LLC, a Broker Dealer and Registered Investment Advisor. Member FINRA /SIPC. Cetera is under separate ownership from any other named entity. Neither Cetera Advisor Networks LLC nor any of its representatives may give leagal or tax advice. Summit Financial Group, inc. is located at 101 Commerce BLVD, Suite A, Loveland, Ohio 45140. 513-891-6050