If you have adopted certain provisions of the SECURE 2.0 Act effective for 2023, it may have changed how you should complete 2023 Forms W-2 (including Forms W-2AS, W-2GU, and W-2VI) required to be filed in January of 2024. The SECURE 2.0 Act allows for additional features in various employer retirement plans to encourage use of these plans. The provisions potentially affecting 2023 Forms W-2 are: De minimis financial incentives (Section 113 of the SECURE 2.0 Act), Roth SIMPLE and Roth SEP IRAs (Section 601 of the SECURE 2.0 Act), and Optional treatment of employer nonelective or matching contributions as Roth contributions (Section 604 of the SECURE 2.0 Act). De minimis financial incentives. Section 113 of the SECURE 2.0 Act amended sections 401(k)(4)(A) and 403(b)(12)(A) to allow de minimis financial incentives (not paid for with or derived from plan assets) to be provided to employees who elect to have the employer make contributions under a 401(k) cash or deferred arrangement or elect to have the employer make contributions pursuant to a salary reduction agreement under a 403(b) plan. If an employer provides a de minimis financial incentive to an employee, that incentive is included in the employee’s wages and subject to applicable withholding requirements, unless an exception applies. See Q&A D-1 through D-6 of Notice 2024-2, 2024-2 I.R.B. 316, at Notice 2024-2, for additional guidance on de minimis financial incentives. Roth SIMPLE and Roth SEP IRAs. Under SECURE 2.0 Act section 601, a simplified employee pension (SEP) arrangement or a savings incentive match plan for employees (SIMPLE) IRA plan may allow an employee to designate a Roth IRA as the IRA to which contributions under the arrangement or plan are made. Salary reduction contributions contributed to Roth SEP and Roth SIMPLE IRAs are subject to federal income tax, social security, and Medicare tax withholding and are included in boxes 1, 3, and 5 (or box 14 for railroad retirement taxes) of Form W-2 and are reported in box 12 using code F (for a SEP) or code S (for a SIMPLE IRA). Employer matching and nonelective contributions made to a Roth SEP or Roth SIMPLE IRA must be reported on Form 1099-R for the year in which the contributions are made to the employee's Roth IRA. Report the total in boxes 1 and 2a of Form 1099-R using code 2 or 7 in box 7 and check the IRA/SEP/SIMPLE checkbox. Designated Roth nonelective contributions and designated Roth matching contributions. SECURE 2.0 Act section 604 permits certain nonelective contributions and matching contributions that are made after December 29, 2022, to be designated as Roth contributions. The reporting instructions that apply to designated Roth contributions (which are made in lieu of elective deferrals) do not apply to designated Roth nonelective contributions or designated Roth matching contributions. Instead, designated Roth nonelective contributions and designated Roth matching contributions must be reported on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for the year in which those contributions are allocated to an individual’s account. The new rules apply to tax year 2023 Forms W-2 required to be filed by January 31, 2024. If you have already filed your 2023 Forms W-2 after adopting certain of these provisions but without following this recent guidance, you may need to file Form W-2c to correct information on those forms. See the General Instructions for Forms W-2 and W-3 for more details about when and how to file Form W-2c.
