Roth Employee Deferrals: A New Option for Your Small Business Retirement Plans

Exciting News for SIMPLE IRA and SEP IRA Plans

We're thrilled to announce a significant enhancement to SIMPLE and SEP IRA plans: Roth employee deferrals. This new feature, introduced by the SECURE 2.0 Act, offers your employees a powerful tool to save for retirement.

What are Roth Employee Deferrals?

Roth employee deferrals allow participants to contribute after-tax money to their SIMPLE and SEP IRA plans. Unlike traditional contributions, which are tax-deductible now but subject to income tax upon withdrawal, Roth contributions grow tax-free. This means you can withdraw your funds penalty-free after age 59½.

Key Benefits of Roth Employee Deferrals

• Tax-Free Growth: Watch your retirement savings grow without worrying about future tax implications.

• Tax-Free Withdrawals: Enjoy tax-free withdrawals after age 59½, making Roth contributions a great option for those planning to retire early.

How to Implement Roth Employee Deferrals

• New Plans: If you're establishing a new SIMPLE IRA or SEP IRA plan, simply select the "Roth elective deferrals" option in your plan's adoption agreement.

• Existing Plans: If you have an existing SIMPLE or SEP IRA plan, you can amend your adoption agreement to add Roth employee deferrals. This change will be effective for the 2025 plan year. Remember to notify all eligible employees of the change before November 2, 2024.

Take Advantage of This New Opportunity

By staying informed about the latest retirement plan enhancements and providing expert guidance, you can help your employees make informed decisions and secure a brighter financial future. We are happy to help you make this change with your existing plan or work with you to help you set up a retirement plan for your business if you don’t already have one. Reach out to our team today for more information, we are always happy to help!

*The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.