Plan Sponsor News

As employers look for more ways to attract and retain quality employees, focusing on the types of retirement savings accounts offered to employees can be helpful. With Roth-related provisions a part of the recently enacted SECURE 2.0 Act, now may be a good time to understand how adding a Roth contribution feature to your plan could benefit participants.

What is a designated Roth account?

You may already be familiar with—and offer—a traditional 401(k) or 403(b) plan, or a governmental 457(b) plan, depending on your organization. The designated Roth account is a feature in a new or existing 401(k), 403(b) or governmental 457(b) that holds designated Roth contributions. It allows participants to contribute funds on an after-tax basis—and pay no taxes on qualifying distributions when the money is withdrawn.¹

There are also no income limits for employees making designated Roth contributions. For some employees, this could be a better option than contributing on a pretax basis, where the money is subject to taxes upon withdrawal.²

How contributions work in 2023 and moving forward

Participants can contribute to both designated Roth accounts and traditional pretax accounts in any year. The combined limit for 2023 is $22,500, plus an additional “catch-up” amount of $7,500 for employees age 50 and older, for a total of $30,000.³

Additionally, as outlined in the SECURE 2.0 Act:

Beginning in 2024, participants with an annual compensation of $145,000 or more who choose to make catch-up contributions must make those contributions on a Roth basis.⁴ This means plan sponsors will need to provide a Roth option to meet this new requirement.
Non-highly compensated employees can make Roth-like contributions to an emergency savings account linked to their workplace retirement plan, up to $2,500 annually. Plan sponsors can auto-enroll employees and provide matching contributions up to $2,500.^4,5

Contact your Mutual of America Financial Group representative, who can answer any questions you may have about offering your employees a designated Roth option. 

¹https://www.mutualofamerica.com/employers/all-retirement-plans/401k-plan/

²https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-designated-roth-account

³https://www.irs.gov/newsroom/401k-limit-increases-to-22500-for-2023-ira-limit-rises-to-6500

⁴https://www.mutualofamerica.com/globalassets/pdfs/psb-wis2.0_secure2.0_final_03jan23.pdf

⁵https://www.finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

On February 23, Mutual of America Financial Group held an informative webinar on the recently enacted SECURE 2.0 Act of 2022. With featured speakers Nick Curabba, Senior Vice President and Associate General Counsel, and Tyrone Golatt, Executive Vice President, Eastern U.S. Region; and moderator Kieran O’Dwyer, Vice President, Corporate Communications, the session focused on key provisions for 2023 and in the years ahead.

Click here to watch a replay of “SECURE 2.0 Act: What Plan Sponsors Need to Know” for:

A quick background into the broad, bipartisan legislation that was signed into law at the end of 2022.
Updates to coverage and participation, contributions, distributions and plan administration that are taking effect this year and those that will take effect in subsequent years. 
What plan sponsors can expect from Mutual of America for help staying updated on additional communications, regulatory guidance and any plan amendments.

Increased income limits for the Retirement Savings Contributions Credit, also known as the Saver’s Credit, could help your employees with a tax credit for contributing to their workplace retirement plan this year.¹

Save now, earn a tax credit later
The credit, which is equal to 50%, 20% or 10% of annual eligible contributions to a qualified retirement plan, is dependent on income limits based on a taxpayer’s adjusted gross income and filing status.² The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly).³

2023 Saver’s Credit

Who’s eligible?³

Employees are eligible for the credit if they are:

1. Age 18 or older;

2. Not claimed as a dependent on another person’s return; and

3. Not a student.

2022 tax returns

There’s still time for employees to take advantage of the credit for last year if they haven’t already filed their 2022 taxes.³ (Note: Qualifying income limits for the 2022 Saver’s Credit are lower than this year’s.) The deadline for filing 2022 tax returns is
April 18, 2023.⁴

If you or your employees have questions about the Saver’s Credit or have other retirement planning questions, please call your local Mutual of America representative today.

Sources:

¹https://www.irs.gov/newsroom/save-for-retirement-now-get-a-tax-credit-later-savers-credit-higher-limits-can-help-low-and-moderate-income-workers-save-more-in-2023

²https://www.irs.gov/taxtopics/tc610

³https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

⁴https://www.irs.gov/newsroom/irs-sets-january-23-as-official-start-to-2023-tax-filing-season-more-help-available-for-taxpayers-this-year

Sources:

¹Equal Pay Act of 1963 | U.S. Equal Employment Opportunity Commission (eeoc.gov)

²Equal Credit Opportunity Act | Federal Trade Commission (ftc.gov)

³Rosemary T. McFadden | FIA

⁴H.R.770 – 101st Congress (1989-1990): Family and Medical Leave Act of 1990 | Congress.gov | Library of Congress

⁵Andrea Jung | National Center for Women & Information Technology (ncwit.org)

⁶Is work-life balance possible at the top? (economist.com)

⁷Indra Nooyi | National Women’s History Museum (womenshistory.org)

⁸I’m Here Because I’m As Good As You” (hbr.org)

⁹Breadwinning Mothers Are Critical to Families’ Economic Security – Center for American Progress

¹⁰Census Bureau Releases New Data on Minority-Owned, Veteran-Owned and Women-Owned Businesses