IRS Issues Guidance on Secure 2.0 Provisions for 2024

The IRS issued guidance on new regulations regarding the treatment of long-term, part-time employees under the SECURE Act. The regulations state that 401(k) plans cannot bar employees with at least 500 service hours over three consecutive 12-month periods, and this eligibility requirement will be lowered to two consecutive 12-month periods starting in 2025.

The notice also addresses section 113, which allows small financial incentives for eligible employees who are not yet participating in a plan. The notice defines a de minimis financial incentive as $250. This means any amount above the $250 threshold will not be permitted.

Some other provisions that the notice addresses include:

• Expanding automatic enrollment in retirement plans (section 101)
• Modification of credit for small employer pension plan startup costs (section 102)
• Military spouse retirement plan eligibility credit for small employers (section 112)
• Contribution limit for SIMPLE plans (section 117)
• Exception to the additional tax on early distributions from qualified plans for individuals with a terminal illness (section 326)
• Employers allowed to replace SIMPLE retirement accounts with safe harbor 401(k) plans during a year (section 332)
• Cash balance (section 348)
• Safe harbor for correction of employee elective deferral failures (section 350)
• Provisions relating to plan amendments (section 501)
• SIMPLE and SEP Roth IRAs (section 601)
• Optional treatment of employer contributions or nonelective contributions as Roth contributions (section 604)

Plan sponsors that have questions about this or other SECURE 2.0 provisions should contact their financial advisor. The complete IRS notice is available here.