Navigating the Top 4 New 401(k) Compliance Issues in 2024

March 8, 2024

As we step into 2024, employers and employees alike are faced with new challenges and compliance issues in managing their 401(k) retirement plans. Staying on top of these changes is crucial to ensure the smooth operation and regulatory compliance of these plans. Here are the top four new 401(k) compliance issues for 2024:

  1. Expansion of Auto-Enrollment and Auto-Escalation Features: One of the significant trends in 401(k) plans is the expansion of auto-enrollment and  auto-escalation features. While these features can help increase employee participation and savings rates, they also come with new compliance requirements. Employers need to ensure that these features comply with the Internal Revenue Service (IRS) and Department of Labor (DOL) regulations, including providing the required notices to employees and following the contribution limits.  Many employers have forgotten the auto-escalation requirement beginning on 1/1/2025
  2. Treatment of Long-Term Part-Time Employees: Under the SECURE Act, long-term part-time employees who work at least 500 hours per year for three consecutive years must be allowed to participate in their employer's 401(k) plan. Employers need to track and manage these employees' eligibility and ensure they are properly enrolled in the plan to avoid compliance issues including corrective contributions employer makes on behalf of the LTPT Employee. 
  3. Student Loan Matching Programs: With student loan debt being a significant financial burden for many employees, some employers are offering student loan matching programs as part of their 401(k) benefits. These programs allow employees to receive employer contributions to their retirement accounts when they make student loan payments. Employers need to ensure that these programs comply with IRS and DOL regulations, including nondiscrimination rules and contribution limits.
  4. Employer Contributions as Roth: Another emerging trend in 401(k) plans is the option for employers to make matching contributions as  Roth contributions. This means that the contributions are made on an after-tax basis, and qualified distributions, including earnings, are tax-free. Employers need to carefully consider the implications of offering Roth contributions, including the impact on employees' taxes and the plan's compliance with IRS rules.

Joining a pooled employer plan, like Oregon TechWorks Pooled Employer Plan, can alleviate some of these compliance burdens for employers. These plans pool together multiple employers' retirement plans into a single plan, allowing for greater economies of scale and access to professional management. By joining a pooled employer plan, employers can leverage the expertise of plan administrators and advisors to ensure compliance with the latest regulations,including the new 401(k) compliance issues in 2024.

In conclusion, 2024 brings new compliance challenges for 401(k) plans, including the treatment of long-term part-time employees, the expansion of auto-enrollment and auto-escalation features, the introduction of student loan matching programs,and the option for employer contributions as Roth. Employers must stay informed about these changes and consider joining a pooled employer plan to effectively manage their 401(k) plans for the benefit of their employees.

Securities offered through Lion Street Financial, LLC. (LSF), member FINRA & SIPC.Investment Advisory Services offered through Lion Street Advisers, LLC.(LSA) ,an investment adviser registered with the SEC. The above firms are not affiliated with Duke Financial Partners, and do not offer tax or legal services.


Share this post
Navigating the Top 4 New 401(k) Compliance Issues in 2024

Ready to become a member?

Reach out today to discover all the ways Techworks can help your tech company thrive.

We'll send you a nice letter no more than once per week. No spam.
© Year Techworks. All right reserved.