SECURE 2.0 and Retirement Plans
What You Need to Know
Are you ready to dive into the retirement revolution that is SECURE 2.0? This is the gift that keeps on giving for your small business clients, offering new opportunities to save, comply and plan for the future. But don’t wait too long to get familiar. Some changes are already here, and others are coming fast.
This topic came up in the ADP Accountant Connect Summit paneI recently moderated. Here’s the lowdown shared by Taxgirl Kelly Phillips Erb and Ron Ulrich, retirement services executive, and Amy Miller, senior director of government affairs, both with ADP.
1. Automatic Enrollment Is Groundbreaking
Starting January 1, 2025, all new retirement plans must include automatic enrollment. That means employees will be enrolled at a minimum of 3% of their pay, with automatic increases each year until they hit at least 10%. This is HUGE. Why? Because auto-enrollment gets more people saving without them even thinking about it. And for accountants, it’s a great conversation starter with your clients about compliance and plan setup.
2. Catch-Up Contributions Are Getting a Glow-Up
Starting in 2025, employees aged 60 to 63 can make “super” catch-up contributions — 150% of the regular catch-up limit! This is an amazing chance for near-retirees to bulk up their savings. As a CPA, you should be encouraging your clients to spread the word to their teams and ensure their payroll systems are set up to handle this.
3. Part-Time Employees Can’t Be Ignored
SECURE 2.0 makes it easier for part-time employees to access retirement plans. If someone works 500 hours a year for two consecutive years, they’ll be eligible to participate in their company’s retirement plan starting in 2025. That’s down from the previous three-year requirement. Help your clients get a handle on this now — tracking hours and planning ahead will save headaches later.
4. The Saver’s Match: Free Money for Low-Income Employees
Coming in 2027, this program replaces the current tax credit with a match directly deposited into an employee’s retirement account. Eligible employees will get 50% of their contributions (up to $2,000) matched by the government. Yep, you read that right — free money. Make sure your clients’ employees know about this benefit so they can start planning their savings strategies.
5. New Flexibility for SIMPLE and SEP Plans
Roth contributions are now an option for SIMPLE and SEP IRAs. For small business clients looking to give their employees more choices and better tax planning options, this is a big deal. It’s also a great time for CPAs to pitch plan upgrades to clients who haven’t revisited their retirement options in a while.
6. Student Loan Payments = Retirement Contributions
This is amazing for young professionals struggling with student debt. Starting in 2024, employers can treat student loan payments as retirement contributions, meaning they can make matching contributions to retirement plans even if the employee can’t afford to contribute directly. This is a win-win for employers trying to attract top talent and employees trying to dig out of debt.
7. Penalty-Free Emergency Withdrawals
Life happens, and SECURE 2.0 understands that. Employees can now take up to $1,000 annually from their retirement savings for emergency expenses without facing the dreaded 10% early withdrawal penalty. It’s another reason why you, as their trusted advisor, should be talking about these plans with your clients.
8. What’s Next: Guidance and Updates
With over 90 provisions in SECURE 2.0, there’s still plenty of guidance to come from the IRS and DOL. From technical corrections to clarifications on implementation, accountants need to stay informed and proactive. Keep an eye out for updates and make sure your clients’ plans are up to date.
Step Up as the Trusted Advisor
SECURE 2.0 isn’t just about compliance; it’s an opportunity for CPAs to provide real value. From guiding plan design to helping clients take advantage of tax credits and benefits, you can become a go-to advisor on all things retirement.
So, what are you waiting for? Start these conversations today, and position yourself as the expert your clients need. SECURE 2.0 is here to stay, and it’s time to help your clients make the most of it!