If you own a business and you offer a 401(k) or similar retirement plan to your employees, you’ll want to stay current on the various changes affecting these types of accounts. And in 2024, you may find some interesting new developments to consider. These changes are part of the SECURE 2.0 Act, enacted at the end of 2022. And while some parts of the law went into effect in 2023 — such as the new tax credit for employer contributions to start-up retirement plans with 100 or fewer employees — others were only enacted this year.
Here are some of these changes that may interest you: New “starter” 401(k)/403(b) – If you haven’t already established a retirement plan, you can now offer a “starter” 401(k) or “safe harbor” 403(b) plan to employees who meet age and service requirements. These plans have lower contribution limits ($6,000 per year, or $7,000 for those 50 or older) than a typical 401(k) or 403(b) and employers can’t make matching or nonelective contributions. These plans are low-cost and easy to administer but the credit for employer contributions doesn’t apply, as these contributions aren’t allowed, and since start-up costs are low, the tax credit for these costs will be correspondingly lower than they’d be for a full-scale 401(k) plan.
Matches for student loan payments – It’s not easy for young employees to save for retirement and pay back student loans. To help address this problem, Congress included a provision in Secure 2.0 that allows employers the option to provide matching contributions to employees’ retirement plans (401(k), 403(b), 457(b) and SIMPLE IRAs) when these employees make qualified student loan payments. Of course, if you offer this match for student loan payments, your costs will likely increase, although these matching contributions are tax deductible. In any case, you may want to balance any additional expense with the potential benefit of attracting and retaining employees, particularly those who have recently graduated from college.
