The Internal Revenue Service today issued IRS Notice 2023-75, setting out the limits on benefits and contributions for 2024. As expected, the limits rose, but not as steeply as last year. Maximum deferrals under a 401(k) or 403(b) plan rose from $22,500 to $23,000, while maximum benefits under a defined benefit plan rose from $265,000 to $275,000.
A chart showing details, and limits from 1996 to 2024, can be found at this link.
The Social Security Administration today issued a News Release announcing that the Social Security wage base will rise from $160,200 in 2023 to $168,600 in 2024. In addition, based on the issuance of the CPI-U for September 2023 we have been able to project section 415 and several other IRS limits for 2024.
A chart showing details, and limits from 1996 to 2024, can be found at this link.
On August 25, 2023, the IRS issued Notice 2023-62, dealing with the SECURE 2.0 requirement that any age 50 catch-up contributions by an employee with prior-year FICA wages over $145,000 (to be indexed with inflation) be made on a Roth basis, rather than a pre-tax basis. The guidance had two effects:
While the guidance applies to 401(k) plans, most governmental entities are not permitted to have 401(k) plans. However, it also affects governmental 457(b) plans, along with 403(b) plans for those governmental entities that are permitted to have 403(b) plans (governmental instrumentalities that also have tax-exempt status under section 501(c)(3), and public schools and universities). It is particularly significant for governmental entities which maintain both 403(b) and 457(b) plans, since an employee is able to double the usual amount of catch-ups by making a catch-up election with respect to both plans.
The IRS also announced its intention to issue further guidance in three areas:
While these three points would be helpful to impacted plan sponsors, they are not yet the IRS’s formal position.
General information on the effect of the notice (for nongovernmental as well as governmental plans) can be found at this link. Information on the amount of regular and catch-up contributions can be found at this link.
The Fifth Edition of the Governmental Plans Answer Book has now been published. The Governmental Plans Answer Book is the only full-length treatise on the law governing the retirement plans that federal, state, and local governments maintain for their employees. The law has changed a lot since the Fourth Edition was published in 2017, and the new edition has been updated to reflect them.
The Fifth Edition of Governmental Plans Answer Book gives subscribers the most relevant, current, and practice-oriented answers to the issues faced daily by plan administrators, attorneys, actuaries, consultants, accountants, and other pension professionals as they navigate the requirements and procedures involved in administering their plans. It examines the following significant changes and case law in this area: Read more.
The Comparison of 457(b) Plans, 401(k) Plans, 403(b) Plans, and Deemed IRAs chart has now been updated to reflect recent developments, including:
A recent CLE webinar provided employee benefits counsel, plan sponsors, and administrators guidance on identifying critical retirement plan issues and correction methods. The panel discussed new IRS self-correction rules and procedures and the primary focus areas of IRS and DOL examinations and audits.
The PowerPoint presentation for the portion of the webinar giving a step by step guide on correcting some common 401(k) plan issues is now available at this link.
The IRS has just issued a new revenue procedure, Rev. Proc. 2021-30, which limits the number of plans that have to make IRS filings under the Voluntary Correction Program (“VCP”) in order to correct past errors.
The guidance expands the Self-Correction Program (“SCP”), which does not require an IRS filing, in two ways:
The revenue procedure also adds new options with regard to correction of overpayments.
Read more.
Carol V. Calhoun has written a Benefits Guide entitled “Government and Tax-Exempt Organizations” for Bloomberg Law. The Bloomberg Law Benefits Guide is intended to be a resource for non-benefits practitioners that is easy to understand and explains complex topics in a straightforward way. Ms. Calhoun’s guide covers the types of plans maintained by governmental and tax-exempt organizations, determination of whether a plan is governmental, legal requirements and restrictions, and correction methods in case of errors in administration. The Benefits Guide is available to Bloomberg subscribers, or a copy of Ms. Calhoun’s chapter is available at this link.
The Eighth Edition of the 457 Answer Book was published on June 5, 2020. Carol V. Calhoun is the author of Chapter 1, History of 457 Plans, and Chapter 14, Miscellaneous Issues.
The 457 Answer Book is an in-depth resource that provides answers to the questions that tax-exempt organizations, state and local governments, their accountants, tax and legal advisors, 457 administrators, product providers, and investment counselors need to know.
Guiding readers through all aspects of 457 plan administration — from installation through the audit process — the 457 Answer Book describes: the duties and responsibilities of those performing the functions; the required legal, accounting, and administrative tasks; checklists that facilitate control of each administrative process; and suggested forms.
The 457 Answer Book also provides:
Sections 403(b) and 457(b) plan compliance presents significant challenges for employee benefits counsel and plan administrators. Sponsors of 403(b) and 457(b) plans must consider the impact of recent regulatory and litigation developments to ensure strict compliance to avoid potential claims.
As part of a Strafford webinar on “403(b) and 457(b) Plan Compliance Challenges,” Carol V. Calhoun gave a presentation on ways in which new developments create challenges for tax-exempt and governmental organizations which sponsor such plans. A copy of the PowerPoint for her speech can be found at this link.