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…


Nov 22, 2024

IRS Adjusts HSA Amounts

In a recent revenue procedure, the IRS announced changes to health savings accounts for 2025. Now is a good time to look at your situation and consider your options. Click through for a review of the changes.


Nov 21, 2024

Creating a Payroll Continuity Plan

When a disaster strikes, it's critical to have a payroll continuity plan — a document outlining the steps necessary to manage payroll through disruption. Click through to learn how to create a multitiered plan that prepares your organization for many possibilities.


Nov 20, 2024

IRS Announces Retirement Plan Changes

Cost-of-living adjustments affect dollar limits for pension and other retirement-related items for tax year 2025—and your contribution to such accounts increases. Click through to see the IRS stipulations regarding specific retirement programs.


Nov 19, 2024

Preparing for the 2024 Tax Season

Between changes to current tax law and uncertainty about how a new president will influence future tax law, planning for the 2024 tax season is challenging. Click through for tips on staying on top of current and proposed tax legislation.


Nov 18, 2024

Federal Court Strikes Down Overtime Rule

With a November 2024 decision that overturns major employment changes announced in April 2024, a federal court has ruled against the Department of Labor. Click through for a review of the current overtime status in the wake of this decision.


Oct 24, 2024

COBRA: What's Your Responsibility?

As an employer, you should be familiar with which employees are eligible for continuation of health insurance benefits under federal law and what events trigger that coverage. You should also know what kinds of communications are required and when. Read through to learn more.




More News & Press can be found in our Archive.