What SECURE 2.0 Means for Payroll Reporting Now (and Later)

One provision of “SECURE 2.0” legislation will affect how some 401(k) Pension Plan participants who are age 50 or older can make “catch-up” contributions. This provision was slated to go into effect January 1, 2024, but in August, the IRS pushed that date back two years, to January 1, 2026. (Interested in other SECURE 2.0 provisions? See SECURE 2.0 and the 401(k) Pension Plan: An Update.)

Under the new rule, participants whose previous-year FICA wages exceed a certain annual threshold will be able to make catch-up contributions only on a Roth (after-tax) basis. To accommodate this, NRECA has updated the 401(k) Plan to make Roth contributions a standard feature effective January 1, 2024, and has alerted those cooperatives who do not currently offer Roth of this coming change via email. Those co-ops will not need a new adoption agreement.

Another update that was already in process when the IRS announced its delay relates to payroll reporting. Ultimately, NRECA, like other plan providers, will need to track participants’ prior-year FICA wages for purposes of this change to catch-up contributions. Some payroll providers have already made updates to their systems and have added a new data field to their reporting. You do not need to take any action when submitting payroll data at this time, even if your payroll provider has already made the change. NRECA will be updating the W-2 File Format guide to account for the change. We will accept files with or without this new field until January 1, 2026, and will touch on the topic in an upcoming compliance webinar.

Also note that the law states that the threshold should be adjusted by inflation. In anticipation of a 2024 implementation, SECURE 2.0 specified a $145,000 threshold (based on 2023 wages). When this provision does go into effect, that value may be higher.

For questions related to these plan changes or payroll reporting, contact your NRECA field representative.