Recap: The SECURE Act 2.0 Webinar

We recently shared a five-part series on the SECURE 2.0 Act. Previous posts are available at www.bpas.com/blog.

Our March 1st webinar was a smashing success! Over 500 attendees joined us for an hour and a half of important information regarding the recently-passed SECURE Act 2.0.

Couldn’t make it?  Want to watch again? Click here to watch the recorded webinar!

Webinar attendees were encouraged to submit questions during the presentation. Those questions were answered in real time by a team of BPAS experts and can be found below.

Q: Will BPAS be adding the field for the Roth plan, or will it be up to the employee to allocate the employer contribution?

A: The participant would need to be provided the option to elect to have ER contributions deposited as Roth.  These funds would need to be deposited into a separate source.  However, we are awaiting clarification if the taxation occurs when the funds are deducted (during the payroll process) or after they have been invested in the plan as a 1099R event (much like an in plan Roth conversion).

Q: When the employee elects Roth employer contributions, will the employer have to pay FICA on those contributions?

A: Additional guidance is needed on the tax reporting. It probably does not increase FICA or medicare wages.

Q: For the qualified distributions and hardship withdraw, are these distributions IRS-required information? Will this fall on BPAS for the administration and follow-up to ensure the event or hardship is eligible, or is the employer responsible?

A: We are exploring how BPAS will support hardship distributions with the  introduction of self-certification.  We will keep our clients updated on  procedural changes as a result of the new legislation.

Q: What is the participant’s spouse is the one that is terminally ill—does that qualify?

A: It is our understanding that the distribution would only be available if the participant was terminally ill.

Q: With respect to [overpayment] recovery: what if the overpayment was discovered last year and they committed to repay at the end of their life-ie. upon their death?

A: If the overpayment and agreement to repay happened pre-SECURE 2.0, then we think that can be honored, but this might be a situation to run by legal counsel (especially if the amount in question is significant).

Q: What if we were notified of a death more than three years after the death occurred? Can we recuperate funds?

A: It might depend on who received the excess funds. If the participant received overpayments and then died, the law prohibits you from going after beneficiary to recoup. If a beneficiary receives a death benefit from the plan that has an overpayment, we believe the plan may ask for excess payment(s) to be returned. To clarify, we don’t think you can recoup payments more than three years unless it was a deliberate and intentional misrepresentation (not reporting a death may or may not fall into that based on facts and circumstances).

Q: Will plans need to be updated before participants can use Employer Contributions as Roth?

A: Yes, this is an optional provision. The plan sponsor would need to make an election to offer this feature.

Q: Roth Catch Up…The $145K wage limit. Is that gross wages?

A: Most likely (similar to compensation used to determine HCE – these should have been synced but oddly were not).

Q: For the 0% QNEC Safe Harbor rule for auto enroll: is there a sample employee notice available? Is that notice due to employees within 45 days and can it be sent electronically?

A: A special notice is to be provided to affected employees within a 45-day timeframe. The notice must include information on the failure, any corrective contributions, when deferrals will begin, options to increase deferrals going forward, and plan contact information. More information can be found in Revenue Procedure 2021-30.

Q: If HCE’s participate in a plan with no Roth option, it was my understanding that the Roth catch-up rule wouldn’t apply, so that the HCE catch-up would go in pre-tax. Is that incorrect?

A: Based on our research, if the plan does not provide Roth deferrals, participants earning more than $145,000 cannot defer catch ups.

Q: Will our BPAS Trust officer be recommending which optional changes we should put in place?

A: We will be working with clients to review the options and the amendments that will likely be needed to adopt these changes.

Q: For ESA accounts: do Roth contributions need to remain in plan for five years before withdrawal or are they available sooner?

A: The ESA is not subject to the normal Roth five year clock/distributable event rules.

Q: Very interested in the Roth matching. Any idea when that will be available?

A: Additional guidance is needed before this feature can be fully supported. The provision is optional and will require an amendment before you can offer to participants. Some of the biggest questions involve the taxation. As guidance is issued, BPAS will provide updates to our clients.

Q: The 2025 auto enrollment and escalation rule: if my plan started in 2023, will the amendment change in 2025 to add the auto enrollment and escalation, or do I need to make that regulation now?

A: The plan will need to be amended to include the automatic enrollment feature effective 1/1/2025. For clients using the BPAS plan document, additional communications will be sent explaining when the amendments are required.

To view + download the presentation, click here.

Questions or concerns about the new legislation? Contact your BPAS representative or email [email protected].

We are providing this summary to our clients as a courtesy based on our understanding of the new legislation. We have tried to be as thorough as possible summarizing the provisions we believe are most likely to impact our clients, partners, and services. We reserve the right to update any of the above information above based on our continued review of the legislation and/or clarifying guidance that may be issued.