IRS Issues Guidance on Certain Secure 2.0 Act Provisions

On December 20, 2023, the IRS released Notice 2024-2 which provides welcome guidance on a number of provisions affecting qualified retirement plans, including 401(k) plans, under the SECURE 2.0 Act (SECURE 2.0). The Notice also generally extends the deadline for amending plans for several recent pieces of federal legislation, including SECURE 2.0, by up to one year.

The purpose of the Notice, which is written in a Q&A format, is to provide guidance on certain discrete issues that might arise during the implementation of the applicable provisions. As such, the IRS recognizes that there may be additional questions that may need to be addressed at a future time. Along these lines, the IRS invites public comments on the Notice, which must be submitted on or before February 20, 2024. 

General Overview of Topics Addressed:

The topics addressed in the Notice that are most likely to impact the majority of 401(k) plans include the following:

• Automatic enrollment required for most new 401(k) plans established after December 29, 2022 (effective on and after January 1, 2025);
• Tax credit for certain small employers for contributions made on behalf of employees to 401(k) plans (effective for tax years beginning in 2023);
• Tax credit for certain small employers for offering enhanced 401(k) plan eligibility to qualifying military spouses (effective for tax years beginning in 2023);
• De minimis financial incentives offered by employers to employees for contributing to a 401(k) plan (effective for plan years beginning in 2023);
• Exception from penalty tax for “early” distributions made on account of terminal illness (effective for tax years beginning in 2022);
• “Safe harbor” corrections of certain automatic contribution failures (including improper exclusions and reasonable administrative errors; effective for failures occurring after December 31, 2023); and
• Employee elections to designate employer matching or nonelective contributions as Roth (i.e., after-tax) contributions (effective for plan years beginning after December 29, 2022).

More Details To Come!

The above is not intended to discuss or explain the provisions listed. We will be following up with one or more supplemental blogs offering details of the topics contained in Notice 2024-2 that should be or the greatest concern to most 401(k) plan sponsors and administrators.

Note: This article is intended as a general overview of Notice 2024-2 as it affects most 401(k) plans and is not meant to offer a comprehensive analysis of the provisions mentioned, or to address other provisions contained in the Notice, including provisions applicable to other types of retirement plans (such as defined benefit plans, governmental plans or 403(b) plans). As always, be sure to consult with your own ERISA attorney or other professional advisor for individualized advice with respect to your plan’s unique situation.