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Writer's pictureW.H. Steiner

SECURE ACT 2.0 and The 702s plan

Updated: Nov 5

SECURE ACT 2.0

The Activation of SECURE Act 2.0: What It Means for Businesses and How the 702s Plan Can Help Ensure a Seamless Transition


On January 1, 2025, the SECURE Act 2.0 is set to take full effect, marking a significant shift in how businesses manage their retirement plans and how employees prepare for their future. The legislation, designed to enhance retirement security for American workers, introduces a host of changes aimed at expanding access to retirement plans and improving long-term financial readiness.


However, with these sweeping reforms come challenges for businesses, particularly regarding compliance, administrative costs, and aligning with the new regulatory standards. This is where the innovative 702s Plan emerges as a valuable solution for companies looking to navigate this transition seamlessly and cost-effectively.


Understanding the SECURE Act 2.0 and Its Implications

The original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 set the stage for key reforms in retirement planning. The SECURE Act 2.0 builds on this foundation by introducing measures that aim to further support and encourage retirement savings among employees. Key elements of the SECURE Act 2.0 include:


  1. Automatic Enrollment: New employer-sponsored retirement plans will be required to automatically enroll employees, starting at a minimum of 3% of their pay, which will increase annually until it reaches at least 10%.

  2. Increased Catch-Up Contributions: Employees aged 50 and older will have the option to make higher catch-up contributions, supporting those closer to retirement in boosting their savings.

  3. Part-Time Worker Participation: The Act will require businesses to extend eligibility for retirement plans to long-term part-time employees, allowing those who have completed at least 500 hours of service per year for two consecutive years to participate.

  4. Student Loan Matching: Employers can match student loan payments with retirement contributions, enabling younger employees to pay off debt while building retirement savings.

  5. Enhanced Roth Options: The legislation expands the use of Roth-style contributions, offering tax diversification for employees’ retirement savings.


While these changes are poised to benefit employees significantly, they introduce a range of administrative and financial challenges for businesses. The mandates of the SECURE Act 2.0 will require companies to reassess their retirement offerings, adapt to new regulatory requirements, and potentially incur additional administrative costs.


The Challenges for Businesses

For businesses, the activation of the SECURE Act 2.0 brings both opportunities and challenges. While enhancing retirement benefits can improve employee satisfaction and retention, it comes with an increase in administrative responsibilities and costs. Compliance with new regulations often involves updating plan documents, recalibrating payroll systems, training HR personnel, and ensuring ongoing monitoring and reporting.


Key Challenges Include:


  • Administrative Burdens: Businesses will need to ensure that their systems and processes align with the automatic enrollment and catch-up contribution rules, which may require significant IT and operational changes.


  • Increased Costs: Traditional 401(k) and pension plans often come with substantial administrative fees, management expenses, and compliance costs, which can burden employers, particularly small and mid-sized businesses.


  • Complexity of Implementation: Rolling out new or updated retirement plans in compliance with the SECURE Act 2.0’s provisions can be complex, potentially requiring legal and financial consultation.


The 702s Plan: A Solution for a Seamless Transition

The 702s Plan emerges as a strategic solution to these challenges, offering a unique approach that aligns with the goals of the SECURE Act 2.0 while providing businesses and employees with significant advantages. The 702s Plan leverages IRS Rule 7702 to offer tax-free growth and withdrawals, functioning as an efficient financial tool that benefits both employers and employees.


Why the 702s Plan is a Game-Changer:


  1. No Administrative Fees or Costs: Unlike traditional retirement plans that can be burdened with administrative and management fees, the 702s Plan eliminates these costs. This is particularly beneficial for businesses seeking to minimize expenses while offering robust retirement benefits to their employees.


  2. Seamless Compliance: The 702s Plan is inherently compliant with IRS regulations and does not require the complex administrative oversight associated with 401(k) or pension plans. This simplicity makes it an attractive option for companies looking to meet the SECURE Act 2.0’s requirements without adding operational strain.


  3. Tax-Free Growth and Distributions: Employees benefit from tax-free growth and the ability to access their funds without facing the tax burdens typical of conventional retirement accounts. This unique feature maximizes the value of employees’ savings, providing them with more financial flexibility and security.


  4. Protection Against Market Volatility: One of the standout features of the 702s Plan is its “zero floor” mechanism, which protects against market downturns. Employees can lock in annual gains without worrying about potential market losses, ensuring a stable and predictable growth path for their savings.


  5. Flexibility for Emergencies and Life Changes: The 702s Plan provides living benefits, allowing employees to access their funds in cases of critical or chronic illness. This added layer of security is not typically available in traditional retirement plans and can be a major asset for employees who value financial preparedness.


  6. Estate Benefit: Provides significant ability to transfer wealth to beneficiaries in a tax-efficient manner. When structured correctly, the estate benefit from a 702s Plan is generally received by beneficiaries without incurring income tax, thus preserving the full value of the estate transfer. Additionally, the plan can bypass probate, allowing a smoother and faster transfer of assets to heirs, ensuring that loved ones receive their inheritance without delays or excessive legal costs.

 

How Businesses Can Transition to the 702s Plan

Transitioning to the 702s Plan can be a straightforward process with the right guidance and support. Here’s how businesses can leverage this plan to comply with the SECURE Act 2.0 while optimizing their retirement offerings:


  1. Assess Current Retirement Offerings: Businesses should start by evaluating their existing retirement plans to identify gaps and areas that may not align well with the SECURE Act 2.0’s requirements. This will provide a baseline for determining how the 702s Plan can complement or replace current offerings.


  2. Engage with Expert Support: One of the advantages of choosing the 702s Plan is the availability of comprehensive, hands-on support from W.H. STEINER. This includes assigning an in-house professional to guide organizations through the transition process at no additional cost, ensuring a seamless integration and adherence to best practices.


  3. Educate Employees: Clear communication is vital for the successful adoption of any new plan. Businesses should focus on educating their workforce about the benefits of the 702s Plan, emphasizing features like tax-free growth, market protection, and flexibility in accessing funds.


  4. Develop a Hybrid Strategy: For organizations that wish to maintain some aspects of their existing retirement plans, a hybrid approach can be beneficial. Implementing the 702s Plan alongside a modest pension or guaranteed income supplement can provide comprehensive coverage that meets a wide range of employee needs.


The Benefits for Employees

The 702s Plan doesn’t just simplify compliance and reduce costs for businesses; it also offers considerable advantages for employees:


  • Higher Take-Home Value: Without taxes on distributions, employees retain more of their earnings, resulting in higher effective income during retirement.

  • Peace of Mind: The plan’s market volatility protection offers stability, allowing employees to build wealth without the stress of market downturns.

  • Legacy Planning: The 702s Plan enables employees to pass on remaining funds to beneficiaries tax-efficiently, securing their families’ futures and enhancing overall financial well-being.


Conclusion: A New Standard for Retirement Planning

The SECURE Act 2.0 is set to revolutionize the retirement landscape by making savings more accessible and secure for America’s workforce. However, with new mandates come new challenges, especially for businesses that must adapt quickly and efficiently. The 702s Plan presents an innovative solution that addresses these challenges head-on, offering a cost-effective, compliant, and employee-friendly alternative.


By eliminating administrative fees, ensuring tax-free growth, and providing unmatched financial security, the 702s Plan empowers businesses to align with the new regulations while supporting their employees’ financial futures. With the support of W.H. STEINER and its dedicated team, businesses can make the transition to this plan seamlessly, maximizing the benefits of the SECURE Act 2.0 and setting a new standard for retirement planning.


As the January 1, 2025 deadline approaches, now is the time for businesses to reevaluate their retirement strategies and consider how the 702s Plan can be part of their roadmap to compliance, cost savings, and employee satisfaction. Embracing this change not only positions companies for regulatory success but also strengthens their commitment to the well-being of their workforce—a commitment that pays dividends for years to come.

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