Spectrum Resource Center

Tax Talk - Fall 2024 Edition

September 10, 2024 By Nick Stucko Education

In this issue of Tax Talk, Spectrum provides a quick reminder about the upcoming SECURE 2.0 provisions that will take effect for retirement plans in 2025 and updates you on important compliance deadlines coming up for defined contribution plans.

Key SECURE 2.0 Provisions Effective in 2025

SECURE 2.0 is a recent piece of legislation that was enacted at the end of 2022. It contains over 90 provisions that have varying effective dates. While many of these provisions have already been implemented, there are a few on the horizon for next year. Here a few key provisions taking effect in 2025:

Expanding automatic enrollment (Section 101) - Requires auto-enrollment and auto-escalation for all 401(k) and 403(b) plans (with certain exceptions for collective bargaining plans, church plans, and governmental plans, as well as plans established on or before December 29, 2022). The initial automatic enrollment amount is at least 3% but not more than 10%. Each year thereafter, that amount is increased by 1% until it reaches at least 10% but not more than 15%.
Higher catch-up limits (Section 109) - Increases catch-up limits to the greater of $10,000 ($5,000 for SIMPLE plans) or 50% more than the regular catch-up amount in 2025 for individuals who have attained ages 60, 61, 62, and 63. The increased amounts are indexed for inflation after 2025.
Long-term, part-time employees (Section 125) - Reduces to two years (from three years) the requirement to allow long-term, part-time workers to participate in employers’ 401(k) plans and extends these rules to ERISA-covered 403(b) plans.
Retirement savings lost and found (Section 303) - Requires the DOL to create and administer a national online searchable lost and found database for Americans’ retirement plans; requires plan administrators to provide annual reporting of disposition of balances for vested terminated participants.

Important Note - Section 603 provides that all catch-up contributions to qualified retirement plans are subject to Roth tax treatment. An exception is provided for employees with wages of $145,000 or less (indexed) in the prior year. This provision has been delayed to taxable years beginning after December 31, 2025.

Upcoming Compliance Deadlines
June 28^th	Deadline for retirement plans with publicly traded employer securities to file their Form 11-K annual report.
June 30^th	Deadline for corrective distributions for failed ADP/ACP tests to highly compensated employees (HCEs), to avoid a 10% excise tax on the employer for EACA plans. (June 30^th falls on a weekend in 2024. There is an open question as to whether the IRS rules for extending deadlines that fall on a non-business day apply to corrective distribution deadlines.)
July 15^th	Deadline for the second 2024 minimum funding quarterly installment payment for DB plans that had a funding shortfall in 2023.
July 29^th	Summary of material modifications is due to participants unless it was included in a timely updated summary plan description (SPD). (The summary of material modifications must be provided no later than 210 days after the close of the plan year; however, 2024 is a leap year, and July 28 falls on a weekend in 2024. The DOL provides that filing dates that fall on a Saturday, Sunday, or a holiday are delayed until the next business day.)
July 31^st	Form 5330, which reports excise taxes related to employee benefit plans, is due to the IRS. Form 5500 is due to the DOL for plans with a December 31 plan year-end. The Form 5500 filing can be delayed if the Form 5558 is filed with the IRS by this date; also called the Application for Extension of Time to File Certain Employee Plan Returns, it is used to apply for an extension to file forms 5500 and/or 5330. Deadline for annual benefit statements for individual account plans not offering participant-directed investments.
Aug 14^th	Deadline for participant-directed defined contribution plans to provide participants with the quarterly benefit/disclosure statement and statement of plan fees and expenses that were charged to individual plan accounts during the second quarter of the year. (Due 45 days after the end of the quarter.)
Sept 15^th	Deadline for money purchase pension, target benefit and DB plans to make required contributions to their plan trust and for S corporations and partnership plan sponsors that filed a corporate tax extension to make 2023 employer profit-sharing and matching contributions. Minimum funding deadline for the 2022 plan year for pension plans that do not have a funding shortfall for 2023. (September 15th falls on a weekend in 2024, so plan sponsors should prepare accordingly.)
Sept 16^th	Form 5500 due to the DOL’s Employee Benefits Security Administration (EBSA) from plans eligible for an automatic extension linked to a corporate tax extension.
Sept 30^th	Summary annual reports are due to participants from plans with a December 31 year-end—due nine months after the plan year-end or two months after filing Form 5500 (unless Form 5500 filing is extended).

We Are Here to Help

As always, Spectrum is here to support you and your employees. Please contact your Spectrum representative for additional information or assistance in meeting some of these important deadlines or if you have any questions about any of the SECURE 2.0 provisions taking effect next year.

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Tax Talk - Fall 2024 Edition

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