Recent Retirement Plan Legislation Applicable to Dentists

Whether you’re a practice owner offering a retirement plan or an associate/employee who has access to a retirement plan, legislated changes from “Setting Every Community Up for Retirement Enhancement Act” (or SECURE 2.0) may impact your retirement plan. Understanding how to integrate these changes into your financial plan is essential for optimizing your savings and helping ensure you’re on track to meet your long-term financial goals.

The second version of the SECURE 2.0 was aimed at helping individuals save more for retirement and included many changes such as increased contribution limits and new options for Roth accounts.  While this act was signed into law in late 2022, many of these changes go into effect this year. Without covering everything in this lengthy piece of legislation, below are a few of the key updates for dentists to be aware of:

SIMPLE IRAs

SIMPLE IRA Roth accounts and SEP IRA Roth accounts are now approved. Effective in 2024, the SIMPLE IRA contribution limits for SOME SIMPLE IRAs will increase. For plans with 25 or fewer employees, the deferral and catch-up contributions will be increased by 10%. Employers with between 26 and 100 employees can give employees the same enhanced deferral limits if they increase their matching contributions to 4%, or their nonelective contributions to 3% (normally 3% and 2%, respectively).

Participant Age at the End of 2024	Previous SIMPLE IRA Deferral Maximum	Additional 10% Deferral Amount	New SIMPLE IRA Deferral Maximum
Less than 50	$16,000	$1,600	$17,600
50 or Older	$19,500	$1,950	$21,450

401(k)s

Employer matching/non-elective contributions (such as safe harbor contributions) can be Roth (if they are not subject to a vesting schedule). These contributions would need to be included in the participant’s income for the year. 

Other Updates

Effective in 2023, for employers with 50 or fewer employees, the retirement plan start-up credit will now be allowed for up to 100% of plan start-up costs (subject to existing overall limits), up from the previous limit of 50%. In addition, such employers will be eligible for an additional credit attributable to employer contributions to defined contribution plans made during the first 4 years.

Unused 529 college savings plan balances may be rolled into Roth IRAs. There are several nuances with this change to be aware of, such as:

• 529 accounts must be open for 15 years or longer.

• The owner of the Roth IRA and beneficiary of the 529 account must be the same.

• There is a lifetime maximum of $35,000.

  
  

It is important to recognize that even though these changes have been approved by Congress, it can take some time for the financial world to be ready to implement the updates. For example, most financial institutions are still getting the infrastructure in place to administer Roth SIMPLE IRAs and Roth SEP IRAs.

By integrating some of the changes in SECURE Act 2.0, you can take advantage of the opportunities to help secure your financial future.

If you want help understanding how these new changes could apply to you and your plan, please contact an advisor or team member by calling 425-888-1911 or email Loyd or Nate directly (loyd@freedom4dentists.com or nate@freedom4dentists.com).

---

Advisory services are offered through Financial Freedom for Dentists, LLC, an SEC Investment Advisor. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services where legally permitted. All content is for information purposes only.