Great Lakes Wire

As 2025 approaches, several significant changes from the SECURE 2.0 legislation are set to take effect, impacting retirement plans and contributions.

For individuals aged between 60 and 63, the catch-up contribution limit will increase. Participants aged 50 or over have previously been able to make additional elective deferrals known as "catch-up contributions." The regular age 50 catch-up contribution limit is $7,500 for both 2024 and 2025. Starting in 2025, this limit will rise to $11,250 for those who turn ages 60 through 63 during the year. "If a participant will be age 64 at the end of the year," Warner Norcross + Judd stated, "the limit drops back down to $7,500."

Changes are also occurring in cashouts of small balances for terminated participants. The threshold has increased from $5,000 to $7,000 starting in 2024. For those using Warner’s pre-approved plan document linked to the maximum legal limit, it's crucial to confirm plan terms with recordkeepers.

The legislation also affects long-term part-time (LTPT) employee participation in retirement plans. SECURE 1.0 required that LTPT employees could make elective deferrals if they worked over 500 hours for three consecutive years and were at least age 21 upon entering the plan. SECURE 2.0 reduces this tracking period to two years and includes applicability to both 401(k) and now also extends these provisions to cover certain aspects of 403(b) plans.

In October of last year, IRS Notice 2024-73 provided more detail on how these changes impact different types of retirement plans while highlighting that existing exclusions remain intact for specific student employees.

Additionally, guidance was issued on various optional changes under SECURE legislation throughout the past year including qualified student loan payments (QSLPs), Roth treatment of employer contributions among others; however due caution is advised before implementing them according to Warner Norcross + Judd: "Employers should continue exercising caution...discussing them with legal counsel before proceeding."

Lastly concerning amendments required by these legislative updates: while some operational changes must occur before corresponding documentation amendments become necessary — which might not be mandated until late into next year's deadlines unless further postponed — organizations need clarity amidst confusions arising when recordkeepers request premature modifications contrary due timing guidelines set forth within current IRS directives yet awaiting additional clarifications anticipated sometime soon after forthcoming advisories become available accordingly without delay thereafter potentially extending beyond initially stipulated timelines presently uncertain given prevailing uncertainties involved therein necessitating careful considerations taken proactively whenever possible ahead upcoming transitions anticipated eventually following subsequent developments underway currently pending further announcements likely forthcoming eventually regarding same topics respectively meanwhile 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