SECURE 2.0 Act: What It Means for Your Construction Company in 2024

One of the most popular New Year’s resolutions Americans make is to save more money for retirement. 

This year, they’ll start getting some extra help from the federal government, which means their employers – including construction firms like yours – need to be up to speed on the latest requirements to help your team members reach their retirement savings goals.

Increasing retirement savings – and tax revenue

On Jan. 1, 2024, a set of new rules began going into effect for how your company manages its employee savings plan, such as a 401(k) or SIMPLE IRA. 

The SECURE 2.0 Act (so named because it’s the sequel to the Setting Every Community Up for Retirement Enhancement Act of 2019) seeks to boost Americans’ retirement savings ... but it’s also aimed at generating federal tax revenue sooner rather than later by making “pay-now” Roth accounts more attractive than standard “pay-later” IRAs.

Construction firms need to comply with the latest rules, and they should be ready to address employee questions about them. 

To help you do just that, here’s a high-level summary of the major takeaways. (SECURE 2.0 contains 92 often complex and detailed provisions, which do not apply to all businesses equally, so be sure to consult your company’s financial advisor for guidance specific to your firm’s employee savings plan.)

What’s new for 2024

• Catch-up contributions: IRA catch-up contribution limits for individuals aged 50 and over now get an indexed annual cost-of-living adjustment ($1,000 for 2024), for a maximum $8,000 IRA contribution this year. The 401(k) contribution limit for 50-plus savers is $30,500 for 2024.
• 529 account rollovers: To encourage Americans to save more for their children’s education, SECURE 2.0 allows 529 college savings account beneficiaries to rollover up to $35,000 over the course of their lifetime from their 529 to a Roth IRA without penalty. While this doesn’t directly impact employers, it’s something your company’s team members would certainly appreciate knowing.
• Employer matching and contributions: To help employees who may not be saving as much for retirement because they are paying off a student loan, employers may treat such payments as elective deferrals and make matching contributions accordingly. Also, employers may increase the amount they contribute to SIMPLE IRA plans up to the lesser of 10 percent of compensation or $5,000 (the indexed amount for 2024).
• Emergency expense distributions: Employees may withdraw up to $1,000 for personal or family emergency expenses (up to $10,000 in a domestic abuse situation) without penalty, and may repay the distribution within three years. This is another great option for your construction firm’s employees to know about.
• ‘Pre-death’ and deceased employee distributions: Recognizing that Americans are working longer – and encouraging them to do so, to help take pressure off the Social Security system – “pre-death” required minimum distributions of Roth-designated accounts within an employer retirement plan are no longer required. Also, a surviving spouse may elect to be treated as the deceased employee for purposes of required minimum distributions.

What’s coming in 2025?

There are many SECURE 2.0 provisions that won’t go into effect until 2025 or later.

One of the most significant for employers will be the “automatic enrollment” requirement: For 401(k) plans created after 2024, eligible employees must be automatically enrolled at a 3 to 10 percent contribution level, which must be increased one percent each year until they reach 10 to 15 percent. However, employees will be able to opt out of participating, and businesses with 10 or fewer employees, or less than three years of operation, will be exempt from the provision.

Required or not, it’s a good idea for construction companies to help their employees save more – and to match as much as they can. 

HR managers should make a resolution this year to help your team members meet their retirement savings goals and they’ll be likely to reward you for it with increased loyalty and productivity in 2024 and beyond.