SECURE 2.0 'clarity' needed: Trade group asks IRS for guidance on key 401(k) provisions
The ERISA Industry Committee seeks clarity, on behalf of their employer members, on implementing key provisions in SECURE 2.0, including matching student loan contributions, auto-enrollment and 401(k)s for long-term, part-timers.
James Gelfand, president and CEO or ERIC, released the letter on behalf of large employer member companies regarding Notice 2024-28 that guides priorities for the Treasury and the IRS. The focus areas and recommendations pertaining to SECURE 2.0 provisions include:
Matching student loan contributions: SECURE 2.0 allows employers to match employee student loan payment, which ERIC encourages companies to offer. In its guidance, the Treasury/IRS should provide additional clarity about the “reasonable procedures” plan sponsors may establish for employees to claim the match. “The IRS should issue this guidance as soon as practicable, so that plan sponsors can implement this feature,” writes ERIC.
Catch-up contributions: Under SECURE 2.0, employees earning over $145,000 annually must be limited to catch-up contributions on a Roth basis, beginning on Jan. 1, 2026. The IRS issued guidance delaying this provision for two years to provide employers enough time to comply with that requirement. ERIC is asking the Treasury and IRS in the letter: “Are the SECURE 2.0 increases in the catch-up limits voluntary for plans?” ERIC is also seeking additional guidance on non-discrimination rules, treatment of new hires, and the “mechanics of participant deferrals.”
Auto-enrollment mandate: SECURE 2.0 mandates that certain employer plans adopt automatic enrollment from 2025, exempting “grandfathered” plans, notes ERIC. However, ERIC is asking for “additional clarification,” asking if this mandate is triggered by plan amendments or other plan changes, including those expanding eligibility of those merged into a multi-employer plan.
Related: SECURE 2.0 Act impact: 8 mandatory changes for 401(k) plans in 2024
Long-term, part-time employees: One key provision in SECURE 2.0 regards eligibility requirements for long-term, part-time employees: Employees who worked at least 500 hours a year for two consecutive years are eligible for a 401(k) plan, effective for plan years beginning after December 31, 2024. There are a few unanswered questions, writes ERIC, regarding full-time employees who were formerly long-term, part-timers, as well as a long-term, part-time employee that meets the eligibility requirements during a plan year: Do they have to wait “until the next plan year”? asks ERIC.