Note the 80/120 rule is still in effect, which allows a Plan to file their current year Form 5500 in the same category (large plan versus small plan) as last year as long as the participant count remains between 80 to 120.
Beginning with 2023 plan years, the methodology to determine the audit requirement has changed. Rather than the threshold of 100 applying to the number of participants a plan has, the threshold is now based on the number of participants with an account balance as of the beginning of the plan year.
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.
For 2025, eligible taxpayers can contribute $23,500 to their 401(k) account, up from $23,000 in 2024. The limit on catch-up contributions for 401(k)s in 2025 for taxpayers 50 and older is $7,500 — the same as it is in 2024, bringing the total contribution limit to $31,000 in 2025.
Beginning in 2025, there will be an increase in the catch-up contribution limits for participants who have reached ages 60 through 63. The new catch-up contribution limit will increase to the greater of $5,000 or 150% of the regular age 50 catch-up contribution limit for SIMPLE IRA plans in 2025.
You must take your first required minimum distribution for the year in which you reach age 73. However, you can delay taking the first RMD until April 1 of the following year. If you reach age 73 in 2024, you must take your first RMD by April 1, 2025, and the second RMD by Dec. 31, 2025.
Key takeaways. The IRS sets the maximum that you and your employer can contribute to your 401(k) each year. For tax year 2023, the most you could contribute to a Roth 401(k), a traditional 401(k), or a combination of the two was $22,500. For 2024, this rose to $23,000.
The 401(k), 403(b), and governmental 457(b) super catch-up applies to eligible plan participants who are between the ages of 60 and 63. The deferral limit is the greater of $5,000 or 150% of the normal “age 50” catch-up contribution limit for 2025 ($7,500). Thus the 2025 “super” catch-up equals $11,250 (150% x $7,500).
If you withdraw from an IRA or 401(k) before age 59½, you'll be subject to an early withdrawal penalty of 10% and taxed at ordinary income tax rates. There are several scenarios, known as hardship withdrawals, where you can avoid the 10% penalty.
Later Friday, Treasury and the IRS issued another set of proposed regulations for the SECURE 2.0 provision that requires newly established 401(k) and 403(b) plans to automatically enroll eligible employees beginning with the 2025 plan year.
Are you required to audit your 401(k) plan? The answer lies in what is known as the 80-120 rule. If your organization offers a qualified retirement plan with fewer than 120 participants, as of the 1st day of the plan year, the answer is no. Your organization doesn't need a plan audit.
A defined benefit or defined contribution plan (including 401(k)) is considered a “small plan” until the total number of eligible participants reaches 100. After reaching 100 total eligible participants, the plan is considered a “large plan.”
If your business has 100 or more eligible participants at the beginning of the plan year, you must undergo a 401(k) audit through a third party. The “keyword” in this situation is “eligible,” so even if some of your employees choose not to participate, they still count toward the audit requirement.
With average costs between $8,000-$12,000 a year to obtain an audit, the DOL's guidance provides a much-appreciated cost savings for those plans hovering near 100 participants who may find they will no longer need to incur the added expense.
Although a plan may be terminated and does not receive contributions, the requirement rules for having an audit have not changed. The general rule is that a plan with 100 or more participants is required to have an annual audit.
Starting in 2025, the SECURE 2.0 Act allows eligible participants who are ages sixty to sixty-three to make “super-catch-up contributions” of up to the greater of: $10,000, or 150 percent of the regular catch-up limit.
Note: The total superannuation balance cap is $1.9 million from 1 July 2023. From 1 July 2021 to 30 June 2023 the total superannuation balance cap was $1.7 million.
As a reminder, employees who are 50 and older are allowed to contribute additional money to their employer-sponsored retirement plan, known as a catch-up contribution. For 2024, the catch-up contribution is an extra $7,500 on top of the $23,000 limit for everyone else, for a total limit of $30,500.
Other states, such as California, typically only allow you to contribute up to 91.45% of earnings to cover additional state-required withholdings, like California's state disability insurance.
For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.
Unlike a traditional IRA or a traditional 401(k), the Roth IRA is one of the few tax-advantaged accounts that allows you to withdraw the money you've contributed at any time for any reason without paying taxes or penalties.
Mistake #1: Not Starting Your RMD on Time
The rules for RMD starting ages have undergone changes in recent years, leading to confusion among many individuals. In the past, the starting age for RMDs was 70½. However, as of 2023, the starting age stands at 73 and is set to increase to 75 in the future.
As a general rule, if you withdraw funds before age 59 ½, you'll trigger an IRS tax penalty of 10%. The good news is that there's a way to take your distributions a few years early without incurring this penalty. This is known as the rule of 55.
Required minimum distributions (RMDs) are the minimum amount that you must withdraw from certain tax-advantaged retirement accounts. They begin at age 72 or 73, depending on your circumstances and continue indefinitely. There is, unfortunately, no age when RMDs stop.