{"id":35885,"date":"2022-12-13T15:18:32","date_gmt":"2022-12-13T20:18:32","guid":{"rendered":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/?p=35885"},"modified":"2022-12-13T15:18:32","modified_gmt":"2022-12-13T20:18:32","slug":"business-report-changes-to-employer-retirement-plans","status":"publish","type":"post","link":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2022\/12\/business-report-changes-to-employer-retirement-plans\/","title":{"rendered":"Business Report: Changes To Employer Retirement Plans"},"content":{"rendered":"
\"\"
Carissa Conley, CPA, co-managing partner, Bucknam & Conley CPAs.<\/figcaption><\/figure>\n

By Carissa A. Conley, CPA<\/p>\n

This year has seen a lot of legislative proposals and a lot of speculation, but not too many new changes to employer-sponsored retirement plans. The most recent set of changes came from the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) of 2019.\u00a0<\/span><\/p>\n

Congress has been working on what\u2019s being tagged as the SECURE Act 2.0, but nothing has yet to make it through. From the 2019 legislation, these are the updates that could affect your retirement plan and employees.<\/p>\n

\u2022 <\/b>The age at which Required Minimum Distributions (RMDs) must begin is now 72, instead of age 70 \u00bd.<\/p>\n

\u2022 <\/b>Long-term part-time employees will be eligible to participate in employer retirement plans after three years of employment. Since this provision went into effect 2021, the earliest their participation can begin is 2024.<\/p>\n

\u2022 <\/b>Inherited retirement accounts must now be fully distributed within 10 years and can no longer be stretched out over the beneficiary\u2019s life expectancy. (There are certain exceptions to this for surviving spouses, minor children, disabled taxpayers, or beneficiaries not more than 10 years younger than the participant).<\/p>\n

\u2022 <\/b>New parents can withdraw up to $5,000 from eligible retirement plans without incurring the normal early withdrawal 10% penalty \u2013 if this is not incorporated into your plan, the employees can still take advantage of this on their personal tax return.<\/p>\n

Keep in mind, if you sponsor a 401k, you must ensure the plan is amended to include the required changes from the SECURE Act. Make sure to check that your plan administrator is taking care of this now.<\/p>\n

<\/span><\/span>Encouraging taxpayers to invest in retirement is still a hot item in Congress and there are certain topics that keep surfacing which would impact your company plan. Auto-enrollment seems to be included in every bill introduced \u2013 this would require employers to automatically enroll its eligible employees in the plan. The auto enrollment would likely start with a 3 percent contribution and increase annually.\u00a0<\/span><\/p>\n

One of the latest proposals required the increases to continue until it reached 10 percent of the employee\u2019s income. All proposals have allowed for employees to opt-out of the enrollment or adjust the withholding percentage.\u00a0<\/span><\/p>\n

Other recent proposals include establishing emergency savings accounts for employees in which unused funds would be rolled into the 401k plan, allowing penalty-free withdrawals from retirement accounts for emergency expenses, allowing Roth match contributions, and further increasing eligibility for part-time workers.<\/p>\n

While the rules seem to be getting more and more complicated, offering a qualified retirement plan is a valuable benefit to your employees, and increases employment longevity. It allows them to contribute to their retirement on a pre-tax basis, or if preferred, make Roth contributions that they may otherwise not be qualified to make.\u00a0<\/span><\/p>\n

Employer contributions made to the plan, through a match provision or profit-profit sharing element, provide employees with pre-tax compensation. All contributions made for your employees is a tax deduction against your business income, as is all the costs associated with administering and maintaining the plan. In addition, in the first few years after you establish the plan, you may qualify for the federal Retirement Plans Startup Costs Tax Credit which could reduce your tax by up to $5,000 for three years.\u00a0<\/span><\/p>\n

For 2023, the amount employees can contribute to eligible retirement plans have been increased significantly for inflation. These include an increase to $22,500 or $30,000 for those 50 and over for contributions to a 401k and an increase to $15,500 for employee contributions to SIMPLE plans.\u00a0<\/span><\/p>\n

By sponsoring a company plan, you provide your employees the ability to save for retirement at much quicker rate than they could individually, since IRAs only allow for contributions up to $6,500 or $7,500 for those 50 and older.<\/p>\n

As alluded to earlier, certain taxpayers may be ineligible to contribute to a Roth IRA. Roth IRAs have lower income thresholds than traditional IRAs, which limit the ability of higher-income earners to contribute. It also disallows contributions to Roth accounts for those filing Married Separately. Currently, tax law does allow for taxpayers to make what is called a back-door contribution to a Roth IRA, but that could result in a large tax liability and is frequently botched, resulting in unexpected tax results.\u00a0<\/span><\/p>\n

To provide an additional benefit to your employees, consider designing your 401k plan to allow Roth contributions. This would provide your employees with the ability to contribute after-tax monies to their retirement that they may not otherwise have.\u00a0<\/span><\/p>\n

Even if they could contribute to a Roth IRA, this would allow for a much larger contribution. Adding the Roth element to your plan during initial design would not increase your plan costs, nor would the maintenance of the Roth accounts. However, you would need to have your plan administrator amend your plan if it does not currently allow for Roth contributions. It would be a good time to do this now while your plan is currently being amended for the SECURE Act changes so that your costs would be minimal. Unfortunately, SIMPLE plans do not allow for Roth contributions.<\/p>\n

Now is a good time to sit down with your plan administrator or experienced professional who can help you with your businesses\u2019 specific plan needs.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Carissa A. Conley, CPA This year has seen a lot of legislative proposals and a lot of speculation, but not too many new changes to employer-sponsored retirement plans. The most recent set of changes came from the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) of 2019.\u00a0 Congress has been working on […]<\/p>\n","protected":false},"author":89,"featured_media":35886,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"yoast_head":"\r\nBusiness Report: Changes To Employer Retirement Plans - Glens Falls Business Journal<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2022\/12\/business-report-changes-to-employer-retirement-plans\/\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"Business Report: Changes To Employer Retirement Plans - Glens Falls Business Journal\" \/>\r\n<meta property=\"og:description\" content=\"By Carissa A. Conley, CPA This year has seen a lot of legislative proposals and a lot of speculation, but not too many new changes to employer-sponsored retirement plans. 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