Spotlight on Sponsors: Fresh Options for Entrepreneurs

In 2024, business owners offering 401(k) or similar retirement plans to employees will need to stay updated on the latest changes affecting these accounts. The SECURE 2.0 Act, enacted at the end of 2022, introduced several new developments this year that may impact retirement planning strategies.

One significant change is the introduction of new “starter” 401(k) and “safe harbor” 403(b) plans for employees who meet age and service requirements. These plans have lower contribution limits and do not allow for employer matching or nonelective contributions. While they are low-cost and easy to administer, they do not qualify for the tax credit for employer contributions.

Another key change is the option for employers to provide matching contributions to employees’ retirement plans when they make qualified student loan payments. This provision aims to help young employees save for retirement while paying off student loans, although it may increase costs for employers.

Additionally, part-time employees who meet certain criteria must now be eligible to contribute to existing 401(k) plans. This inclusion could lead to higher business expenses, but it may also attract quality part-time employees.

Lastly, employers offering 401(k), 403(b), or 457(b) plans can now include a pension-linked emergency savings account (PLESA) for non-highly compensated employees. This account allows for tax-free withdrawals without penalties and must be matched at the same rate as other employee contributions.

Business owners are advised to consult with tax and financial professionals to understand how these changes may impact their retirement plans and make informed decisions for the future.