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A Plan with Training Wheels: Starter 401(k) Plans are an Easy Plan to Get Retirement Savings Moving

June 04, 2024 (3 min read)

The SECURE 2.0 Act made significant changes to the IRC and ERISA, as applied to tax-favored retirement plans. Section 121 of the SECURE 2.0 Act amended IRC § 401(k) to authorize a simplified cash or deferred arrangement, called a starter 401(k) plan. The plans are primarily for employers that don’t already maintain a retirement plan (outside of collective bargaining employees). They are elective deferral-only plans (no other contribution types are permitted) subject to an annual inflation-indexed contribution limit starting at $6,000, plus catch-up contributions. They are easier and intended to motivate employers to adopt retirement savings plans for their employees.

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Related Content

  • SECURE 2.0 Act Implementation Timeline for Retirement Plan Sponsors
    Reference this practice note summarizing chronologically the implementation timeline for retirement plan statutory rule changes to the IRC and ERISA, due to passage of the SECURE 2.0 Act (signed into law on Dec. 29, 2022, as Division T of the Consolidated Appropriations Act, 2023 (Pub. L. No. 117-328)). Starter 401(k) plans became available in 2024. The plan must have an automatic enrollment feature that defaults participants into a contribution rate of not less than 3% and not more than 15% of compensation, subject to a participant's right to opt out or contribute at a different rate. 
  • SECURE 2.0 Act Impact on Retirement Plan Compliance and Administration
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Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.      

  • Employee Benefits & Executive Compensation Key Legal Developments Tracker (Current)
    Stay informed on new developments.
    • Retirement Plans. IRS issues a news release reminding employers how SECURE 2.0 Act changes may affect Form W-2 information and withholding requirements. IRS, News Release.
    • Health and Welfare Plans. DOL's EBSA division issues a final rule that rescinds ''association health plans, '' noting the expanded definition of ''employer'' under the prior final rule marked a substantial departure from the DOL's longstanding pre-rule guidance on ERISA's definition of "employer." 89 Fed. Reg. 34106 (Apr. 30, 2024)EBSA Fact Sheet.
    • Health and Welfare Plans. HHS issues final regulations addressing section 1557 of the Affordable Care Act which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. HHS is also revising its interpretation regarding whether Medicare Part B constitutes federal financial assistance for purposes of civil rights enforcement. 89 Fed. Reg. 37522 (May 6, 2024); HHS, Section 1557 Final Rule: FAQs
  • Generative Artificial Intelligence (AI) Resource Kit is a frequently updated collection of current Practical Guidance materials on generative AI, ChatGPT, and similar tools.
  • For related Practical Guidance content on important recent trends, please review these easy-to-use Resource Kits on a variety of emerging topics:


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