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As of Jan. 1, 2026, SECURE 2.0 introduced significant changes to Roth catch‑up contributions. Here’s a look at what that means.

As of Jan. 1, 2026, SECURE 2.0 introduced significant changes to Roth catch‑up contributions.

While the Roth catch‑up mandate may initially look like a payroll or recordkeeping issue, its effects reach well beyond administration. The change introduces real compliance considerations and can alter how defined contribution allocations are structured. For participants age 50+ whose prior‑year FICA wages exceed the applicable threshold, catch‑up dollars must now be made as Roth. The requirement was originally set for 2024 but was delayed to 2026 to allow time for implementation.

Who’s Affected?

There’s been a lot of talk about the Roth catchup requirement, but as a reminder the following are key points regarding which plan participants are affected:

• • • Threshold: Prior-year FICA wages over $150,000 (indexed annually from $145,000).
    • Catch-Up Limits: $8,000 in 2026 (or up to $11,250 for ages 60–63).
    • Exemptions: Self-employed individuals aren’t subject to this because they don’t have FICA wages. Therefore some HCEs/key employees may fall below the threshold.
    • Plan Limitation: If the plan doesn’t offer Roth, impacted participants simply lose the ability to make catch-up contributions.

Much has been made of how the requirement affects employee contributions, but little attention has been devoted to how it interacts with the IRS annual addition limit.

How Does This Interact with 415(c)?

Catch-up contributions don’t count toward the annual additions limit under Internal Revenue Code (IRC) Section 415(c) ($70,000 in 2025; $72,000 in 2026). Under Treas. Reg. §1.414(v)-1(b), catch-up treatment applies when a participant exceeds an applicable limit, whether that’s a statutory limit such as that under IRC Section 415(c), an employer-imposed cap or an ADP limit.

Opportunity: If a participant defers less than the limit under IRC 402(g) ($23,500 in 2025; $24,500 in 2026), they can still treat additional deferrals (up to the catch-up limit) as catch-up contributions to maximize the IRC 415(c) allocation.

Example: A 51-year-old earning $350,000 defers $10,000 in 2025. The participant could still receive a $67,500 profit-sharing allocation, triggering $7,500 of that deferral to be treated as catch-up. This approach has been confirmed by IRS representatives as allowable, but it’s still subject to 401(a)(4) and deduction limits. So if the client also has a defined benefit plan to contribute to, it might need to be PBGC covered for this to work, otherwise the client would be subject to the 404(a)(7) limit which could limit the ability to use this approach. The plan would also need to have demographics to allow it to pass testing with the maximum defined contribution allocation.

What Changes Were Made in 2026?

If catch-up contributions are recharacterized under IRC 415(c) and the participant is subject to the Roth requirement, any pre-tax deferrals must be converted to Roth. That means potential tax consequences for the participant. Going forward, you should either:

1. Avoid maxing out the 415(c) limit if doing so would trigger catch-up reclassification for participants who:

• • • • Have deferrals below the 402(g) limit,
      • Are subject to the Roth requirement,
      • And have not deferred at least the portion being reclassified as catch-up on an after-tax Roth basis.

OR

2. Discuss with the client in advance to confirm whether the impacted participant wants to:

• • • • Maximize 415(c) and trigger catch-up reclassification,
      • Understanding that the reclassified portion must be converted to Roth and will therefore be taxable.

Correction Options for Misclassified Pre-Tax Catch-Up

If pre‑tax deferrals fall under the Roth requirement, they must be reclassified and converted to Roth. The final regulations issued in September 2025 outline the available correction methods.

• • • W-2 Correction: Must occur before W-2 issuance, which is rarely practical for 415(c)-triggered corrections.
    • In-Plan Roth Rollover: Move the deferral plus earnings to Roth; participant receives 1099. Taxable to the participant in the rollover year, not the deferral year.
    • Deadline: End of the year following the deferral to avoid qualification failure.

Compliance Pitfalls

The Roth catch up requirement can also create potential nondiscrimination challenges.

• • • The FICA threshold is lower than the HCE threshold, so some NHCEs could be subject to Roth while some HCEs aren’t. If the plan lacks Roth, this creates a potential benefit rights and features nondiscrimination failure.
    • Final regs address this and provide relief if catch-up is prohibited for HCEs with self-employment income, but the cleanest solution in most cases would be to amend the 401(k) to add Roth as soon as possible.

Key Takeaways for Practitioners

The Roth catch‑up mandate carries wider implications than many of us on the DB side may have expected. It doesn’t just affect participant taxation — it also has ripple effects on plan compliance and the mechanics of defined contribution allocations.

So if you’re an actuary who assumed this requirement wouldn’t affect your work, it’s definitely worth a closer look.

In practice, helping clients navigate these changes means taking a few proactive steps, including encouraging them to amend their plans to add Roth deferrals as soon as possible and flagging situations in which an IRC 415(c) maximum allocation could cause pre‑tax deferrals below the 402(g) limit to be treated as catch‑up — ultimately triggering the Roth requirement and the associated taxation.

Tiffany Myers, FSA, EA, MSEA, FCA, is Manager, Actuarial Services, FuturePlan.

Josiah Thornton, EA, MSEA, PhD, is an Enrolled Actuary at FuturePlan. 

Original Article Provided By: https://www.asppa-net.org/news/2026/2/roth-catch-up-contributions-final-regulations-and-415c-interactions/

The SECURE 2.0 Act of 2022 (SECURE 2.0) introduced major changes to 401(k) plans, especially for small businesses. Three major changes take effect for plan years beginning after December 31, 2024 (January 1, 2025 for a calendar-based plan). They relate to automatic enrollment, long-term part-time eligibility, and catch-up contributions. As a small business owner, it’s crucial to understand the changes to ensure your 401(k) plan is compliant.

Below we break down the SECURE 2.0 changes that will affect 401(k) plans for 2025, including practical steps to meet their requirements. If you need further assistance, contact your 401(k) provider.

SH_LearnMore_LightBlue
Automatic Enrollment in New Plans
Automatic enrollment is a 401(k) plan feature that automatically enrolls eligible employees at a preset default contribution rate, unless they actively opt out. The feature aims to simplify participation and increase retirement savings rates among employees.

What’s New for 2025
SECURE 2.0 requires new 401(k) plans to include automatic enrollment in 2025 unless an exemption applies. The feature must meet Eligible Automatic Contribution Arrangement (EACA) standards and the following requirements:

Initial default rate- Must be between 3% and 10% of compensation.
Rate escalation – If the initial default rate is below 10%, it must increase by at least 1% annually until reaching at least 10% (but no more than 15%).
Who’s Affected
401(k) plans established on or after December 29, 2022 (the effective date of SECURE 2.0) are subject to the mandate. Plans established before December 29, 2022 are not.

Exemptions:

Businesses with 10 or fewer employees.
Businesses that are less than three years old.
Church and governmental plans.
How to Comply
To implement automatic enrollment, business owners should take the following steps:

Set Up Payroll Processes: Ensure your payroll processes account for automatic enrollment, including auto-escalation if applicable.
Confirm a Default Investment: Verify your plan’s default investment fund (often a target-date fund or balanced fund) is in place.
Notify Employees: Distribute the required auto-enrollment notice to employees before the auto-enrollment kicks in.
Correct Errors: Closely monitor your first year of auto-enrollment. If someone is mistakenly left out or enrolled incorrectly, use the IRS safe harbor correction method to fix it promptly​.
Long-Term, Part-Time Employees
The SECURE Act of 2019 (SECURE 1.0) introduced long-term, part-time (LTPT) rules that require employers to allow part-time employees to join their 401(k) plan after working 500+ hours per year for three consecutive years, regardless of their plan’s normal eligibility requirements.

What’s Changing for 2025
SECURE 1.0’s LTPT rules took effect in 2024. For 2025, SECURE 2.0 reduced the LTPT service requirement to two consecutive years.

Who’s Affected
401(k) plans whose eligibility requirements require employees to complete at least 500 hours of service in a 12-month period to participate. A 401(k) plan that requires fewer hours – or none at all – will never produce an LTPT employee.

How to Comply
Here are the steps you want to take to ensure LTPT employees are properly included (if applicable):

Track Hours in Payroll: Begin tracking part-time and seasonal employees’ hours if you don’t already.
Identify Eligible Employees: Identify any employees who have hit the 500-hour mark for two years in a row.
Enroll Eligible Employees: Once a part-time employee meets the LTPT definition, they must be allowed to join your plan on the next normal entry date. Set up a procedure to notify and enroll LTPT employees once they become eligible.
Higher Catch-Up Contributions for Ages 60-63
401(k) catch-up contributions allow employees aged 50 and older to contribute beyond standard IRS contribution limits, helping them boost their retirement savings as they approach retirement. The age 50 catchup limit for 2025 is $7,500.

What’s Changing for 2025
SECURE 2.0 allows (but does not require) plans to increase the catch-up limit for individuals aged 60-63 to the greater of $10,000 or 150% of the regular catch-up limit ($11,250 for 2025). Key details include:

Age Range: The enhanced limit applies from the year an individual turns 60 until the year they turn 64.
Inflation Indexing: The $10,000 limit will be indexed for inflation after 2025.
Who’s Affected
Employees who will be ages 60, 61, 62, or 63 in a given tax year. The standard catch-up limit applies again for the year in which a participant turns 64.

Here’s a comparison of contribution limits for 2025:

Age

Catch-Up Limit

402(g) Limit

Total Contributions

50-59

$7,500

$23,500

$31,000

60-63

$11,250

$34,750

64+

$7,500

$31,000

How to Comply
Adjust payroll & recordkeeping systems – Employers and payroll providers must be prepared to track participants who qualify for the enhanced catch-up limits based on age.
Notify employees – Affected participants should be informed that they can contribute more during this four-year window to maximize their retirement savings.
When Must 401(k) Plans be Amended for SECURE 2.0 Changes
Employers must comply with SECURE 2.0 changes as they take effect in 2025, but have until December 31, 2026 to formally adopt the changes by plan amendment (later deadlines apply to collectively bargained and government plans).

Next Steps for Small Business 401(k) Plans
SECURE 2.0’s 2025 changes present a few compliance challenges, but with timely action they are manageable – and even beneficial – for your business and employees. In summary, make sure to add automatic enrollment for new plans, include long-term part-timers, adjust catch-up contributions for Ages 60-63.

Partner with your 401(k) provider or advisor now to update plan documents and systems. By taking the steps outlined above, you’ll ensure your 401(k) plan stays compliant and continues to operate smoothly.

Original Article Provided By: https://www.employeefiduciary.com/blog/secure-act-2-2025-changes

The SECURE 2.0 Act continues to reshape retirement savings in 2025, offering new opportunities for many to strengthen their financial future. Key updates include a higher required minimum distribution (RMD) age and expanded eligibility for 401(k) plans, making it easier for part-time workers to participate.

A major highlight for 2025 is the enhanced catch-up contribution limits for individuals ages 60 to 63. If you’re in this age group, you can now contribute up to $11,250 to your 401(k), 403(b), or governmental 457 plan, far above the standard catch-up amount.

These increased retirement contributions help you maximize your savings during your peak earning years and can lower your taxable income and reduce your overall tax liability.

Standard 401(k) and IRA Catch-Up Contribution Limits

Before we dive into so-called “super catch-ups,” it helps to review standard catch-ups. (Catch-up contributions are additional retirement savings allowances for individuals 50 and older, designed to help boost their retirement savings.)

These provisions allow eligible savers to contribute beyond the standard annual limits in various retirement accounts like 401(k)s and IRAs.

This could help make up for years of inadequate savings or maximize your tax-advantaged retirement funds. However, note that catch-ups are optional for eligible employees.

• For the 2024 tax year (returns you’re likely filing now), the standard annual deferral limit was $23,000, and the catch-up contribution limit for those age 50 and older is $7,500.
• That means an active participant 50 or older could contribute up to $30,500 last year.

SECURE 2.0 enhanced catch-up contributions for ages 60-63

Under SECURE 2.0, beginning this year, 2025, individuals ages 60 to 63 are eligible for increased catch-up contributions in their retirement plans.

This applies to 401(k), 403(b), and governmental 457(b) plans that currently offer catch-up contributions. It’s also important to note that this change is optional for employers. So, each plan sponsor will decide whether to implement this feature in their retirement plans.

This enhanced catch-up contribution limit is $10,000 or 150% of the standard age 50+ catch-up contribution limit, whichever is greater.

For example, the catch-up limit for those 50+ for 2024 was $7,500. So, the IRS has announced that for 2025, the enhanced catch-up contribution limit for those 60-63 is $11,250.

To qualify for the enhanced catch-up contributions, participants must meet specific criteria:

• Be 60, 61, 62, or 63 by the end of the calendar year
• Generally already contributed the maximum deferral amount

Note: Once participants turn 64, they revert to the standard age 50+ catch-up contribution limit.

And, of course, catch-up contributions are optional for employees.

2025 Enhanced Catch-up Contribution

New Roth catch-up contribution rules for high-income earners

SECURE 2.0 also includes new provisions regarding Roth contributions for high earners. As Kiplinger has reported, IRS rules for this provision have been delayed until 2026.

However, when that provision kicks in, if a participant’s wages exceed $145,000 in the previous year (subject to cost-of-living adjustments), they have to make catch-up contributions on a Roth basis.

Making catch-up contributions on an after-tax Roth basis means paying taxes on your retirement savings during years when you sometimes earn more.

2025 super catch-up contributions: Bottom line

Introducing enhanced catch-up contributions under SECURE 2.0 is part of a broader effort to encourage more workers to save for retirement.

With that in mind, allowing increased savings during key pre-retirement years could help some who haven’t been able to save as much earlier in their careers.

However, whether this is a good idea for you will depend on several factors, including employers’ ability and willingness to adapt their plans and systems.

Also:

• Setting aside an extra $11,250 a year might not be practical if you’re juggling other financial responsibilities, like paying down debt or handling medical bills.
• As mentioned, as of 2026, if you earn over $145,000, these extra contributions must go into a Roth account, which means paying taxes upfront. That can reduce your take-home pay and might not make sense if you expect to be in a lower tax bracket in retirement.
• Plus, if you already have a healthy retirement balance, focusing on other goals, like building an emergency fund or investing in more flexible accounts, could be beneficial.

Before making large catch-up contributions, consider your overall finances and priorities to determine whether this strategy is right for you.

Original Article Provided By: https://www.kiplinger.com/taxes/super-catch-up-contribution-for-age-60-63

WASHINGTON, March 12—Associated Builders and Contractors today released an analysis of 2024 state union membership data published by unionstats.com, which found that in 41 states at least 80% of workers in the private construction industry did not belong to a union. At least 90% of workers in the private construction industry did not belong to a union in 29 states in 2024 and 2023, up from 26 states in 2022 and 24 states in 2021. Nationwide, the U.S. Bureau of Labor Statistics reports that 7,978,000 construction industry workers were not members of a union in 2024, a 12,000-person increase from 7,966,000 workers in 2023. Overall, union membership decreased by 38,000 to 916,000.

“More and more construction workers work for nonunion employers, defying four years of new union-friendly policy schemes advanced by the self-declared most pro-union president in history,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “In contrast, commonsense policies providing opportunities for all of America’s construction workforce are rooted in the ideals of merit and worker choice, which help taxpayers get the best possible infrastructure products at the best possible price.”

A record-high 89.7% of construction workers nationwide are not part of a union, according to the U.S. Bureau of Labor Statistics, up from 89.3% in 2023.

“Workers’ choice to affiliate with unions independent of government interference creates immense value in the marketplace, which is why ABC will continue to oppose government-mandated project labor agreement policies and advocate for all construction workers to choose how to achieve their career dreams and prosper in a safe and healthy environment,” said Brubeck. “ABC urges the Trump administration and the 119th Congress to advance policies that prioritize fair and open competition, preserve worker choice and address the issues that the construction industry faces, including a skilled labor shortage of 439,000 in 2025 alone, widespread regulatory burdens, inflation, high interest rates, expiring tax provisions and other economic challenges.”

Original Article Provided By: https://davisbacon.org/blog/federal-judge-blocks-portions-of-department-of-labor-rulemaking-on-davis-bacon-act.php/

WASHINGTON — The Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2025 has increased to $23,500, up from $23,000 for 2024.

The IRS today also issued technical guidance regarding all cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2025 in Notice 2024-80 PDF, posted today on IRS.gov.

Highlights of changes for 2025

The annual contribution limit for employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is increased to $23,500, up from $23,000.

The limit on annual contributions to an IRA remains $7,000. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment but remains $1,000 for 2025.

The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan remains $7,500 for 2025. Therefore, participants in most 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan who are 50 and older generally can contribute up to $31,000 each year, starting in 2025. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2025.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2025:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $79,000 and $89,000, up from between $77,000 and $87,000.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $126,000 and $146,000, up from between $123,000 and $143,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $236,000 and $246,000, up from between $230,000 and $240,000.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
• The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $150,000 and $165,000 for singles and heads of household, up from between $146,000 and $161,000. For married couples filing jointly, the income phase-out range is increased to between $236,000 and $246,000, up from between $230,000 and $240,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
• The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $79,000 for married couples filing jointly, up from $76,500; $59,250 for heads of household, up from $57,375; and $39,500 for singles and married individuals filing separately, up from $38,250.
• The amount individuals can generally contribute to their SIMPLE retirement accounts is increased to $16,500, up from $16,000. Pursuant to a change made in SECURE 2.0, individuals can contribute a higher amount to certain applicable SIMPLE retirement accounts. For 2025, this higher amount remains $17,600.
• The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most SIMPLE plans remains $3,500 for 2025. Under a change made in SECURE 2.0, a different catch-up limit applies for employees aged 50 and over who participate in certain applicable SIMPLE plans. For 2025, this limit remains $3,850. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in SIMPLE plans. For 2025, this higher catch-up contribution limit is $5,250.

Details on these and other retirement-related cost-of-living adjustments for 2025 are in Notice 2024-80 PDF, available on IRS.gov.

Original Article Provided By: https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000

On Monday, June 24, 2024, a federal judge for the US District Court for the Northern District of Texas (the Court) instituted a nationwide injunction on the enforcement of portions of the US Department of Labor’s (DOL) 2023 rulemaking titled “Updating the Davis-Bacon and Related Acts Regulations,” (2023 Final Rule) holding that the 2023 Final Rule had overstepped the statutory directive of the Davis-Bacon Act (DBA). For a refresher on the 2023 Final Rule, please see this alert published by Cozen O’Connor last year.

The Court found that the plaintiffs in this case had a likelihood of success on the merits because the 2023 Final Rule exceeded its statutory mandate in three main ways:

1. The 2023 Final Rule, at Section 5.5(e), which made DBA contract clauses on labor standards and wage determination effective by operation of law even when those clauses were omitted from a contract covered under the DBA, was found to be contrary to existing law;
2. The 2023 Final Rule unlawfully amended the DBA by applying it to other workers (specifically truckers) who are not laborers and mechanics performing “directly on the site of the work.”¹; and
3. The 2023 Final Rule wrongfully defined Material Supplier, thereby unlawfully expanding the scope of DBA coverage.

Each of these issues bears careful attention and review by any contractor (or subcontractor) performing under a DBA-covered contract or subcontract. Although we expect the DOL to appeal this decision, the issuance of a nationwide injunction bars the DOL from enforcing of any of these provisions.

Self-Implementing Contract Clauses

Section 5.5(e) of the 2023 Final Rule reads as follows:

Incorporation by operation of law.

The contract clauses set forth in this section (or their equivalent under the Federal Acquisition Regulation), along with the correct wage determinations, will be considered to be a part of every prime contract required by the applicable statutes referenced by § 5.1 to include such clauses and will be effective by operation of law, whether or not they are included or incorporated by reference into such contract unless the Administrator grants a variance, tolerance, or exemption from the application of this paragraph. Where the clauses and applicable wage determinations are effective by operation of law under this paragraph, the prime contractor must be compensated for any resulting increase in wages in accordance with applicable law.

This operation of law provision drew significant commentary during the comments period and raised significant concerns within the DBA community. In a nutshell, the provision made the DBA applicable to contracts even where an agency had failed to include the required DBA clauses, effectively rendering the application of the DBA as self-implementing. In effect, this shifted the burden of determining DBA coverage from agency contracting officers to contractors. After a recent oral argument and extensive briefing, the Court held that this section was contrary to law. The Court cited the fact that both the Supreme Court of the United States and the Armed Services Board of Contract Appeals have ruled that the Davis-Bacon Act is not self-implementing.² The Court also rejected the DOL’s argument that the DBA clauses should be read into the contract under the Christian doctrine and found that, as written, the operation of law provision is not consistent with basic contract and procedural due process principles. As a result, contractors performing work covered by the DBA can, at least for now, rely on the four corners of the contract for determining coverage by the DBA.

Extending the DBA Beyond Laborers and Mechanics to Truckers

Another aspect of the new DBA regulations challenged by the plaintiffs was DOL’s expansion of the scope of coverage of the rule in Section 5.2 to workers beyond laborers and mechanics and to workers not employed directly on a work site. DOL had attempted to expand the scope of covered work under the DBA by including transportation as a covered category in the 2023 Final Rule. On this issue, the Court determined that the DOL’s 2023 Final Rule had overstepped its authority delegated by Congress by expanding the DBA to cover time spent by drivers on site. The Court stated in no uncertain terms that trucking is not covered by the DBA: “Expanding the DBA to apply to trucking impermissibly conflicts with the statute, which defines its coverage and is limited to “construction, alteration, or repair, including painting and decorating, of public buildings and public works…”³ Truck drivers are not de facto “mechanics and laborers employed directly on the site of the work.”⁴ Citing a “substantial body of case law,” the Court noted that DOL’s attempt to include transportation drivers under the DBA is misplaced. Overall, the Court’s clear rejection of DOL’s attempt to expand the scope of DBA coverage to truck drivers prevents DOL from continuing to require truck driver coverage by way of the Court’s injunction striking down relevant portions of Section 5.2 of the 2023 Final Rule.

The 2023 Final Rule Wrongfully Defined Material Supplier

One other change in the 2023 Final Rule challenged by the plaintiffs was the attempt by DOL to apply DBA coverage to certain material suppliers operated by subcontractors or contractors. Again, the Court found that the DBA only applies to mechanics and laborers employed directly on the site of work, and any attempt to expand DBA coverage to material suppliers is contrary to law and would amount to a fundamental amendment to the DBA. The Court also held that treating material suppliers as covered by the DBA would result in a reclassification of employees of material suppliers as laborers and mechanics, violating the DBA’s plain language. Furthermore, from a practical standpoint, this reclassification would result in an arbitrary and capricious delineation of DBA coverage between employees who work for a material supplier operated by a subcontractor or contractor and employees who work for a material supplier unaffiliated with a contractor/subcontractor. As such, the Court included in its injunction the definition of Material Supplier set forth in 29 C.F.R. § 5.2, thus thwarting DOL’s attempt to expand the scope of the DBA to include certain material suppliers.⁵

Conclusion

The Court’s injunction covering Section 5.5(e) and portions of Section 5.2 of the 2023 Final Rule limits the scope of these changes and, in many ways, takes the DBA back to the basics: only mechanics and laborers are covered by the DBA. In addition, by striking down the DOL’s operation of law provision, the Court also refocused DBA coverage issues back to a review of the clauses and terms included in a solicitation or contract.

Original Article Provided By: https://www.cozen.com/news-resources/publications/2024/federal-judge-blocks-portions-of-department-of-labor-rulemaking-on-davis-bacon-act

The SECURE 2.0 Act is a recently enacted significant piece of legislation that has brought about substantial changes to the retirement account rules in the United States. These changes affect retirement savings plans such as 401(k), 403(b), IRA, Roth accounts, and related tax breaks.

The primary objective of SECURE 2.0 is to encourage more workers to save for retirement. However, complex changes have confused some taxpayers and plan sponsors. Therefore, it is important to understand the key points of the law.

Here’s what you need to know.

SECURE 2.0 Act retirement plan changes

More than 90 provisions in SECURE 2.0 cover all types of retirement savings plans. Some requirements are in place as of 2023. Other provisions become effective this year, in 2024, or later years, i.e., 2025, 2026, or 2027.

Some changes in SECURE 2.0 involve:

• RMD Age Rules and Penalties
• Higher 401(k) Catch-up Contributions
• Automatic Enrollment Changes
• Emergency Withdrawal Flexibility
• 529 Plan Roth Rollovers
• A Student Loan Payment 401(k) Match

This SECURE 2.0 summary highlights key provisions of the new law and potential implications for your retirement planning.

Required Minimum Distributions

SECURE Act 2.0 RMD changes

2023 RMD age change. Under the law before SECURE 2.0, you generally had to take required minimum distributions (RMDs) from your retirement plan beginning at age 72. SECURE 2.0 increased the required minimum distribution age to 73 as of January 1, 2023. However, if you turned 72 in 2022, you had to take your first RMD by April 1, 2023.

The bump to age 73 is one of several new RMD rules. However, the RMD age eventually moves to 75.

Delays in the age for taking RMDs raise tax implications and can present practical challenges. The latter can be particularly significant for retirees with lower incomes, who typically use RMDs to cover living expenses.

For example, pushing the RMD age back might be a “nonevent” for some retirees, according to Paul Camhi, vice president and senior financial advisor at The Wealth Alliance, who told Kiplinger, “Most [older adults] can’t afford to wait until 72 [to take RMDs], let alone until age 75.”

RMD rule delay for inherited IRAs. The IRS is again delaying the implementation of IRA RMD final rules, this time until 2025.

• With previous IRS relief, penalties are waived for missed RMDs from specific IRAs inherited in 2020, 2021, 2022, and 2023.
• (Missing an RMD or failing to take the appropriate distribution amount incurs a 25% IRS penalty — down from 50% due to SECURE 2.0 RMD penalty changes — added to the amount that should have been withdrawn.) However, the penalty can be as low as 10%.
• IRS transition relief has been offered due to confusion over the timing of required plan payouts and implementation of related legislative changes.

The latest RMD rule delay allows beneficiaries of inherited IRAs to understand distribution requirements better and take payouts. The extension offers more time to roll over distributions from earlier this year that were mischaracterized as RMDs.

Related: IRS Delays IRA RMD Rules Again

RMDs and Roth 401(k)s. Beginning this year (2024), the SECURE 2.0 Act eliminates RMDs for qualified employer Roth 401(k) plan accounts.

Previously, there was a difference in the rules that applied to Roth 401(k) accounts in employer plans versus Roth IRAs (i.e., the latter were not subject to required minimum distributions).

For more information see New Roth 401(k) Changes to Know.

As a result, it is important to consider how SECURE 2.0 RMD changes could impact you and plan accordingly.

SECURE 2.0 401(k) Changes

How does SECURE 2.0 affect 401(k)?

SECURE 2.0 contains numerous provisions that impact 401(k) plans. These provisions take effect in various years but deal with issues including financial incentives to contribute to a retirement plan, hardship withdrawal rules, automatic enrollment, contributions limits, and part-time worker access.

Each is mentioned below.

401(k) Financial Incentives

Small incentives to contribute to a retirement plan. The SECURE 2.0 Act allows your employer to offer small financial incentives (e.g., low-dollar gift cards) to help boost employee participation in a workplace retirement plan.

This provision became effective beginning January 2023.

Withdrawal Rules 2024

SECURE 2.0 hardship withdrawal

Emergency expense distributions. Beginning in 2024, under the SECURE 2.0 Act, you will be allowed to take an early “emergency” distribution from your retirement account to cover unforeseeable or immediate financial needs.

That emergency distribution of up to $1,000, could only be taken once during the year, but won’t be subject to the usual additional 10 percent tax that applies to early distributions.

But: if you choose not to repay the distribution within a certain time, you won’t be allowed to take other emergency distributions for three years.

• Other hardship withdrawals are provided for in the SECURE 2.0 Act including  403(b) plans.
• (Currently, distribution rules for 403(b) and 401(k) plans are different, so SECURE 2.0 would conform to those rules.)
• Also, under SECURE 2.0, penalty-free withdrawals, on small amounts of money from retirement plans in cases involving domestic abuse, will be allowed.

For more information see New 401(k) Early Withdrawal Tax Rules for 2024.

2025 Auto Enrollment

401(k) automatic enrollment under SECURE 2.0

Automatic enrollment in retirement plans. Beginning in 2025, the SECURE 2.0 Act expands automatic enrollment in retirement plans. The rationale is that automatic enrollment in 401(k) plans has been shown to increase participation.

According to the U.S. Department of Labor, “Whether you already have a 401(k) plan or are considering starting one, automatic enrollment 401(k) plans offer many advantages.”

In addition to helping small businesses attract and retain employees, the Labor Department points to tax advantages associated with 401(k) participation (including the deduction of employer contributions and deferred taxation on contributions and earnings until distribution).

With some exceptions for small businesses, SECURE 2.0 requires 401(k) and 403(b) plans to automatically enroll eligible participants, who can opt out of participation.

Contributions Limits

SECURE Act 401(k) contribution limit

Higher catch-up contribution limit. Right now, if you are 50 or older you can make catch-up contributions to your retirement plan up to certain limits. SECURE 2.0 increases those limits, beginning in 2025, to the greater of $10,000 or 50 percent more than the regular catch-up amount if you are 60, 61, 62, or 63 years old. After 2025, those amounts will be indexed for inflation.

Also, as of 2024, SECURE 2.0 Act rules, which are now delayed, were designed to impact how eligible workers with incomes over $145,000, make catch-up contributions. (The income threshold will be adjusted for inflation.)  See below for more information on the delay of this rule to 2026.

Catch-up Contributions

SECURE 2.0 Roth catch-up contributions

Under SECURE 2.0, if you are at least 50 years old and earned $145,000 or more in the previous year, you can make catch-up contributions to your employer-sponsored 401(k) account. But you would have to make those extra contributions on a Roth basis, using after-tax money.

• You couldn’t get tax deductions on those catch-up contributions as you would with typical 401(k) contributions, but you could withdraw the money tax-free when you retire.
• The SECURE 2.0 Roth catch-up contribution rule won’t apply to taxpayers making $144,999 or less in a tax year.

Note: The Roth catch-up rule was originally supposed to take effect in 2024. However, due to problems with implementing Roth catch-up contributions, the IRS  announced that Roth catch-up contributions for high earners age 50 or over won’t be required until 2026. (That’s a two-year delay of the new rule.)

Keep in mind, however, that those catch-up contributions will eventually (in 2026), have to be made on a Roth basis if your income meets or exceeds the $145,000 threshold.

More: The 401(k) Catch-up Contributions Problem for 2024

Student Loans

SECURE student loan match

Employer fund match for student loan payments. Under the SECURE 2.0 Act, your employer can make a matching contribution to your retirement plan account based on your student loan payment amount. This is designed to address the fact that high student loan debt can keep people from saving for retirement. This will become effective in 2024.

Note: Student loan payments resumed in fall 2023 since student loan debt forgiveness was been struck down by the U.S. Supreme Court.

529 Plan Rollovers

529 SECURE Act Roth IRA

Roth rollover option for 529 plans. Beginning in 2024, SECURE 2.0 changes 529 plan rules.

• In limited circumstances (i.e., there are a lot of requirements that must be met including that the Roth IRA account must be in the name of the 529 plan beneficiary), some people may be able to rollover a 529 plan that they have maintained for at least 15 years to a Roth IRA.

Annual limits for the rollover would have to be within the annual contribution limit and there will be a $35,000 lifetime limit on what can be rolled to the Roth IRA.

Related: 529 Plans Get a Boost With Tax-Free Rollovers to Roth IRAs

2027 Savers Match

SECURE 2.0 Saver’s Credit

Saver’s match. Beginning in 2027, the SECURE 2.0 Act replaces the nonrefundable Saver’s Credit for some IRA and retirement plan contributions with a federal matching contribution that will be deposited into your IRA or retirement plan. The so-called “Saver’s Match” will be 50% of IRA or retirement plan contributions up to $2,000 per person. However, some income limits and phase-outs will apply.

Related: Saver’s Credit: Do You Qualify?

Part-Time Workers

Part-time employees SECURE Act changes

The SECURE 2.0 Act contains many more provisions that could impact your retirement savings account (and in turn, potentially your taxes and tax breaks).

Some of those provisions involve everything from part-time worker access to employer retirement plans, and small business tax credits, to contributions to SIMPLE, and SEP plans.

Other provisions address issues surrounding stock ownership and savings bonds.  Consult a financial advisor or trusted tax professional if you have questions or concerns about how these changes might impact you or your taxes.

Lost Accounts

Lost 401(k) accounts database

Retirement savings “lost and found.” Have you ever lost track of your 401(k)? Well, the SECURE 2.0 Act enables the creation of a searchable database to help people find retirement benefits that they lost track of. The retirement savings “lost and found” will be housed at the Department of Labor and be created within the next two years.

Data show that millions of 401(k) accounts are regularly forgotten, amounting to nearly a trillion dollars in unclaimed retirement benefits.

Original Article Provided By: https://www.kiplinger.com/retirement/bipartisan-retirement-savings-package-in-massive-budget-bill

WASHINGTON, March 28—Associated Builders and Contractors and its Florida First Coast chapter filed suit today in federal court to stop the Biden administration’s unlawful scheme to mandate project labor agreements on construction contracts procured by federal agencies. ABC’s complaint asserts that President Joe Biden lacks the legal and constitutional authority to impose a new federal regulation injuring economy and efficiency in federal contracting and illegally steering construction contracts to certain unionized contractors, which employ roughly 10% of the U.S. construction workforce.

ABC estimates the Biden pro-PLA policy will affect at least 180 federal construction contracts valued at $16 billion across America on an annual basis, including several federal construction contracts for projects in Jacksonville and dozens of projects in Florida and the Southeast.

“ABC seeks a national injunction against President Biden’s executive overreach, which makes a mockery of federal procurement laws and rewards powerful special interests with government construction contracts at the expense of taxpayers and the principles of fair and open competition in government procurement,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “ABC has heard from large and small federal contractors—including firms signatory to union agreements—and concerned federal agency contracting officers that the Biden administration’s controversial PLA policy has already stifled competition and raised costs on federal construction contracts in Florida and across the country. This policy will continue to do so absent a successful legal challenge.”

“When mandated by government agencies, PLAs needlessly increase construction costs by 12% to 20%, reduce opportunities for qualified large and small contractors and their craft and noncraft employees, and exacerbate the construction industry’s worker shortage of more than half a million people by discriminating against the nearly 90% of the industry workforce that is not unionized,” said Brubeck. “PLAs discourage competition by forcing contractors to sign union collective bargaining agreements, which require them to follow inefficient and cumbersome union work rules, hire most or all workers from union halls and apprenticeship programs, accept compulsory union representation on behalf of any remaining members of its existing workforce and expose them to union wage theft of up to 34% of their compensation unless they join a union and vest in union benefits plans.”

ABC and its Florida First Coast chapter filed the lawsuit in the U.S. District Court for the Middle District of Florida in Jacksonville in response to the Federal Acquisition Regulatory Council’s Dec. 22, 2023, final rule––and the related Dec. 18, 2023, White House Office of Management and Budget Memo––implementing President Biden’s Feb. 4, 2022, Executive Order 14063, which mandates PLAs on federal construction projects of $35 million or more.

In its legal filing, ABC asserted that the Biden administration’s PLA rule is beyond the scope of executive authority and violates the Constitution, the First Amendment and the Administrative Procedure Act. The complaint also notes that the rule violates the Federal Property Administrative Services Act, the Competition in Contracting Act, the National Labor Relations Act, the Office of Federal Procurement Policy Act and the Regulatory Flexibility Act, among others, by limiting competition and forcing large and small businesses to sign union agreements as a condition of winning a federal contract for construction services.

ABC members won 54% of the $205.56 billion in federal contracts worth $35 million or more during fiscal years 2009-2023 and built award-winning projects safely, on time and on budget, without unnecessary government-mandated PLAs.

Original Article Provided By: https://www.abc.org/News-Media/News-Releases/abc-files-lawsuit-against-president-bidens-anti-competitive-project-labor-agreement-rule-for-federal-construction-projects