IRS Reminds Employers About SECURE 2.0 W-2 Reporting Effects

The following article first appeared in the Insights section of Mercer’s website. It is reposted here with permission.

---

The Internal Revenue Service has published a new webpage summarizing how certain provisions of the SECURE 2.0 Act of 2022 (Div. T. of Pub. L. No. 117-328) affect employers’ W-2 reporting.

Although the webpage doesn’t provide any new information, it consolidates into one resource previously published IRS guidance on the W-2 impact of three SECURE 2.0 provisions that took effect soon after the law’s enactment.

De Minimis Financial Incentives

Employers may now give employees small financial incentives—such as gift cards—to encourage participation in 401(k) and 403(b) plans.

IRS Notice 2024-2 set the cap on these incentives at $250 in total, whether paid at one time or as a series of installments over multiple plan years.

These incentives are generally includible in taxable income and subject to ordinary tax withholding and reporting requirements. 

Roth Matching and Nonelective Contributions

Section 401(k), 403(b) and governmental 457(b) plans may let participants designate employer matching contributions and nonelective contributions as Roth contributions.

These amounts are includible in an employee’s income when made, but unlike Roth contributions made in lieu of an employee’s pretax elective deferrals, these Roth matching and nonelective contributions are generally not considered wages.

As a result, they aren’t subject to federal tax withholding and are reportable on Form 1099-R, not the W-2.

Roth for SEPs and SIMPLEs

Simplified employee pensions and savings incentive match plans for employees of small employers IRAs can now let employees designate a Roth IRA to receive contributions.

Roth employee deferrals are includable in income for the tax year made and are reportable on Form W-2.

Roth employer matching and nonelective contributions are includable in the tax year made (even if deemed made on the last day of the employer’s prior tax year) and are reportable on Form 1099-R, not the W-2.

---

About the authors: Margaret Berger is a partner in Mercer’s Law & Policy Group. Brian Kearney is a principal with that group.