E1: 07/08: Enhancement For Secure Act 2.0 Section 603 To Automate Moving Employees Enrolled in 401K Catch Up to Roth Catch Up When Prior Year FICA Wage Earnings Is Over $145,000
(Doc ID 2980795.1)
Last updated on DECEMBER 10, 2024
Applies to:
JD Edwards EnterpriseOne US Payroll - Version 9.2 and laterInformation in this document applies to any platform.
Symptoms
Enhancement to manage Secure Act 2.0 Section 603, Elective deferrals generally limited to regular contribution limit. (effective 1/1/2025)
SUMMARY OF REQUEST:
There needs to be a way to automate the determination and movement of employees enrolled in Pre-Tax 401k aged 50 or older (anytime in that calendar year and/or on their birthday) who made more than $145,000 in Social Security wages in the prior year and should be moved to a post-tax 401k Catch Up plan (aka Roth). If the employee wages in the prior year are not available then the move does not apply.
The ability to automate catch-up change for employees age 50 and over is not available today and is requested.
REQUIREMENTS and CONSIDERATIONS:
• Logic to look at employees (EE) enrolled in Pre-Tax 401(k) and age 50 or older; and W2 reportable Social Security (SS) taxable wages were greater than $145K in the prior year and assign post-tax Roth 401(k) for catch-up for the same percentage or modify existing 401(k) pretax catch up to the post-tax Roth equivalent.
• Customers should be able to utilize this function regardless if they are using Benefits Administration or EE deduction benefit accrual (DBA) only.
• Customers should also be able to utilize the solution regardless if they process W2s in E1 or not. Therefore, we are recommending we use the tax history vs W2 file.
• The wage requirement of $145K may change annually and be a variable or processing option.
• The age of the EE is a requirement. The age parameter should give us the option to select if it is age at the end of the year or on the actual birthday as plans are not all the same. (FAGE "age of the employee as of a certain date" or DOB "date of birth")
• The $145K is the YTD SS Taxable Wages – Taxable Federal D from Tax History table F06136 (Tax Area = FEDERAL, Tax Type = D). Need to calculate the taxable Federal D = Gross – Excludable – Excess. This Secure Act requirement is effective when Taxable Wages for Federal D are greater than or equal to $145,000. The system needs to summarize/total the taxable wages across multiple companies and tax IDs.
• EE enrolled in pretax and Roth catch-up would need to combine existing Roth catchup with the percent of the prior pretax catchup when the change is made. Ex: if currently enrolled in 3% of pre-tax and 2% of Roth, once the employee hits $145K, the system should enroll the employee in 5% Roth.
• We need the system to determine the correct Plan ID and/or DBA start date and end dates (use the same logic that was designed in Enrollment with Eligibility), but also provide the ability for the user to override the start/end dates. Provide the ability for the update to run on a scheduler rather than initiated by a user (something similar to Batch Enrollment). There would be different dates based upon pay cycle codes-mimic logic similar to Benefits Administration (logic will require some discussion). Some customers only use DBAs for deferred comp, and some use both Plan IDs and DBAs—the solution needs to accommodate both scenarios (Affordable Care Act uses logic to determine if Plan IDs and/or DBAs are used and design similar functionality for Section 603).
• Ability to leverage solution regardless of Tools version, Orchestrator version, 32 or 64-bit, and Groovy or Ruby.
LINKS for Legislative Validation:
https://www.congress.gov/bill/117th-congress/house-bill/2954/text
has government links inside...
https://www.investopedia.com/secure-2-0-definition-5225115
Cause
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