Pub. 13 2023-2024 Issue 5

T More SECURE 2.0 Provisions Take Effect in 2024 By Mike Rahn, CISP, ASCENSUS The SECURE Act of 2022 (SECURE 2.0) made many changes to both individual retirement accounts (IRAs) and retirement plans sponsored by employers. But, like comparable past legislation, not all SECURE 2.0 provisions took effect immediately. One reason is the federal tax impact of some provisions. Tax benefits to individuals and businesses may have the effect of reducing federal tax revenue, which lawmakers may choose to “pay for” over time by delaying the effective date of certain provisions. The following are important provisions of SECURE 2.0 that did not take effect immediately but became effective in 2024. IRA Related Provisions IRA Catch-Up Contributions Now Indexed: Contributioneligible Traditional and Roth IRA owners age 50 and older may make an additional “catch-up” contribution. This contribution — which was formerly fixed by statute at $1,000 — will, in future years, be indexed for inflation in $100 increments. 529 Plan-to-Roth IRA Rollovers: 529 plan designated beneficiaries may roll over certain balances in their 529 plans to a Roth IRA. Amounts rolled over are subject to a lifetime limit of $35,000 and, in any year, may not exceed the lesser of a designated beneficiary’s earned income or that year’s Roth IRA contribution limit (further reduced by any other IRA contributions made for that year). The 529 account must have been in effect for 15 or more years, and amounts rolled over must have resided in the account for at least five years. Employer Plan Related Provisions Mid-Year Switch from SIMPLE IRA to Safe Harbor 401(k)/403(b) Plan: Employers that sponsor a SIMPLE IRA plan may now make a mid-year change to a safe harbor 401(k) or 403(b) plan. Under previous rules, such a change could only be effective as of the next calendar year. Existing amounts in these SIMPLE IRA accounts are immediately eligible for rollover to the successor safe harbor plan, regardless of whether the SIMPLE IRA accounts have received contributions for two or more years, so long as the amount that is rolled over is subject to the distribution restrictions of the 401(k) or 403(b) plan, as applicable. Additional SIMPLE Plan Employer Contributions: In addition to the standard employer matching or nonelective contribution, employers may now make additional nonelective contributions for the year. These contributions may not exceed a uniform percentage of up to 10% of annual compensation or — if less — $5,000 per employee. This amount will be indexed for inflation. Larger SIMPLE Plan Employee Contributions: Certain employers may allow increased salary deferral limits for their employees. Eligible employers are those who did not offer a 401(a), 403(a) or 403(b) plan to the same employees during a three-taxable-year period preceding the year that they established the SIMPLE plan. For such employers, SIMPLE plan salary deferral limits for 2024 may be increased by 10% above the cost-of-living-adjusted limits. The increased limit applies to both the base salary deferral limit, and to the catch-up contribution for employees age 50 or older. The increased limits apply automatically to plans of those employers with no more than 25 employees who earned $5,000 or more for the previous year, regardless of whether they have otherwise met plan eligibility requirements. Employers with more than 25 such employees may elect to have the increased Colorado Banker 16

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