Oct 22, 2024

Employers' Responsibilities Under the SECURE 2.0 Act

The SECURE 2.0 Act creates incentives for employers and employees to add to employee retirement accounts. However, some incentives and contributions are taxable and need to be reported on Form W-2 and/or 1099-R. Read through to see what to report and where.

 

The SECURE 2.0 Act aims to expand the ease of saving for retirement, to simplify the management of retirement plans, and in general to improve financial security for American workers and retirees. The updated law includes new options for 401(k) and 403(b) employer contributions, adjustments to required minimum distribution age for IRAs, and increased catch-up contribution limits. The act also has incentives to encourage employee enrollment.

However, these provisions may affect the amounts that employers need to report on Form W-2. The IRS has issued a fact sheet to clarify plan provisions and their impact on Form W-2. Among the specifics:

  • Section 113 allows employers to offer de minimis (up to $250) financial motivation to employees who participate in retirement plans. The incentives cannot be paid from plan assets and are considered taxable income to the employee — in other words, these incentives are subject to regular tax withholding.
  • Under Section 601, Roth Savings Incentive Match Plan for Employees and Roth Simplified Employee Pension contributions are subject to federal income tax withholding, plus the Federal Insurance Contributions Act and the Federal Unemployment Tax Act.
  • Under Section 604, optional employer nonelective or matching Roth contributions are not subject to withholding for federal income tax, FICA or FUTA.

Filling out the form

Employee contributions to a Roth SEP or Roth Simple IRA generally will be included on Form W-2 in boxes 1, 3 and 5. They will also be reported in box 12 with code F (for a SEP) or code S (for a SIMPLE IRA).

When an employer makes matching or nonelective contributions to a Roth SEP, to a Roth SIMPLE IRA or as designated Roth contributions to a qualified plan, the employer must report them on Form 1099-R for the year the contributions were made.

For Roth SEP or SIMPLE IRA contributions:

  • Record the total amounts in boxes 1 and 2a.
  • Use code 2 or 7 in box 7.
  • Ensure the IRA/SEP/SIMPLE checkbox is selected.
  • For designated Roth contributions to a qualified plan, use code G in box 7 to indicate the type of contribution.

Additional details can be found in IRS Notice 2024-2.

If you filed 2023 W-2 forms without following these new guidelines, you may need to file Form W-2C to correct any errors. Consult your tax accountant and financial advisor for advice on staying compliant.

©2024


 

MORE RECENT NEWS…


Aug 29, 2025

Silver Workers: No Substitute for Experience

Once, employees approaching retirement age could look forward to a long, relaxing post-work life. For much of the 55+ crowd, this is no longer the case, with many forestalling retirement for as long as possible. Read through for advice on employing silver workers in your organization.


Aug 28, 2025

Show Me the Money: Creating a Salary Policy

For any company to treat their employees with respect and fairness, it needs to have a transparent pay equity policy in place that is shared with all employees. Read through to understand why creating pay equity is beneficial to your organization.


Aug 27, 2025

Understanding the New Tax Break for Overtime Pay

Thanks to a new federal income tax deduction provided by the One Big Beautiful Bill Act, many workers who put in extra hours will be able to keep more of their earnings. Read through to see who qualifies, how much could be saved and what the limits are.


Aug 26, 2025

New Federal Tax Break for Tipped Workers

A new federal law may allow millions of tipped workers to keep more of their earnings starting in 2025. Read through to find out who qualifies, how much could be saved and what to watch for.


Aug 25, 2025

Who Can Work in the US?

Did you know that federal and state laws prohibit the use of immigration or citizenship status when making employment decisions? Read through for insights into how to approach immigration-related matters in a lawful way.


Jul 31, 2025

Lose an Employee but Gain Information

Employers conduct exit interviews with departing employees during the final days of offboarding. If done right, these interviews can be a source of valuable information to help the company improve.




More News & Press can be found in our Archive.