Business owners are facing a new employment environment. Employees have the ability to demand employers pay attention to their physical and financial well-being or risk a departing workforce. As a result, employers must begin to reexamine their benefit offerings, including their retirement plan options.

The SECURE Act 2.0 forces employers to examine their retirement plan benefits for employees and to ensure these plans are in the best interest of their employees. Read on to learn more about the SECURE Act 2.0 and what that may mean for your business retirement plan benefits.

What Is the SECURE Act 2.0?

A set of guidelines that is expected to impact retirement planning for years to come is known as the passage of the Securing a Strong Retirement Act of 2023 (SSRA) and has been signed into law. The law, in its final form is known as the SECURE Act 2.0.

In short, SECURE 2.0 will do the following:

• Raise the required minimum distribution age to 75
• Expand the catch-up contribution limits for 401(k), 403(b), and SIMPLE plans
• Allow employers to make matching contributions to a 401(k) plan based on an employee’s student loan payments
• Offer part-time workers access to employer-sponsored retirement plans after meeting certain requirements
• Enhance the “Savers Credit”
• Encourage automatic enrollment into 401(k) plans so employees must opt out of saving rather than opting into it
• Increase tax credits for start-ups
• Simplify plan administrations and compliance

What Changes Has the IRS Made to Retirement Planning Guidelines?

The IRS updated their annual limits for 2023. Traditional and safe harbor 401(k) plans now boast elective deferrals of $22,500 (up from the $20,500 from 2022). SIMPLE 401(k) plans will also increase from $15,500 from $14,000 from 2022.

These plans also have increased their catch-up contributions for employees over age 50. The limits for traditional and safe-harbor plans are now $7,500 and $3,500 for SIMPLE plans.

What Are the Varied Retirement Plan Options for Employees?

There are several different types of retirement savings plans that employers can offer employees. The following are the plans and the benefits to each:

• Traditional 401(k) plans are available to all employers (regardless of size) and offer flexibility for contributions.
• Roth 401(k) plans are available to employers of all sizes and allow employers to combine traditional and Roth options to allow for contributions pre- and post-tax income.
• Solo 401(k) plans are for employers without any employees other than their spouse.
• Safe Harbor 401(k) plans are typically for employees with an ownership stake in a company and they need this for them to save at a high level. Using a Safe-Harbor requires a mandatory match and 100% vesting for employer matching contributions at the time of contribution.
• Simple 401(k) plans are for businesses with no other retirement options that have fewer than 101 employees and are willing to adhere to strict contribution and vesting requirements.
• Pooled Employer Plan (PEP) is for a business of any size that wishes to pool their assets with other employers to create a plan administered by a specialized third party (Pooled Plan Provider) to mitigate risk and simplify administration.
• Profit-Sharing 401(k) plans are for employers that want to base contributions on company profits.
• 403(b) plans are for non-profit organizations and certain government businesses in place of 401(k).

How Do These Changes Affect Your Retirement Plan Benefits?

The idea with these changes is for employers, to give their employees the opportunity for long- term financial success. Therefore, the most important thing you can do to improve your employee retirement plan {401(k)} is to learn about the different plan options and how each option can benefit your employees.