What’s New for 2025

When the ball dropped in Times Square on New Year’s Eve, a number of new retirement account provisions became effective. We’ve previously written about each of these new rules in The Slott Report. This article will serve as a checklist, with links to the prior articles.

• As happens frequently, many retirement account dollar amounts increased in 2025 as a result of indexing for inflation. For example, the 2025 regular (non-catch-up) elective deferral limit for 401(k), 403(b) and 457(b) plans went up from $23,000 to $23,500. In addition, the SEP contribution limit increased to 25% of up to $350,000 in pay, but no more than $70,000. Here’s a link to our November 6, 2024, Slott Report article with more details: irahelp.com/slottreport/401k-contribution-limits-increase-for-2025/.

• A big change to the required minimum distribution (RMD) rules made by the 2019 SECURE Act requires most non-spouse retirement account beneficiaries to empty the inherited account by the end of the 10^th year following the year of death. IRS regulations also mandate that any beneficiary subject to the 10-year rule who inherited from someone who had started RMDs must continue them during years 1-9 of the 10-year period. However, because of confusion over this rule, the IRS did not require annual RMDs for beneficiaries in this category for years 2021-2024. Starting this year, yearly RMDs become due. See the following Slott Report post from November 11, 2024, for more information: irahelp.com/slottreport/annual-rmds-for-certain-beneficiaries-kick-in-soon/.

• Several new rules for retirement plans have kicked in. Many new 401(k) and 403(b) plans will be required to include an automatic enrollment feature. This means that eligible employees will be required to make elective deferrals unless they opt out. In addition, it’s now harder for plans to keep out part-time employees. Any employee who has worked at least 500 hours in two consecutive 12-month periods (but excluding periods before 2023), and who is age 21 or older, must be allowed to participate. Both of those provisions are discussed in more detail in the December 2, 2024, post on the Slott Report: irahelp.com/slottreport/new-401k-provisions-that-become-effective-in-2025/.

• Last but not least, Congress has increased catch-up contribution opportunities for certain older employees in 401(k), 403(b) and governmental 457(b) plans starting this year. This “super catch-up” is higher than the current age-50-or-older catch-up — for 2025, it is $11,250. The super catch-up is available only to those who are age 60, 61, 62 or 63 on the last day of the year.A super catch-up ($5,250 for 2025) also applies to age 60-63 SIMPLE IRA participants. This means that employees in SIMPLE plans will be subject to one of three different catch-up limits, depending on their age and the size of their employer. These two Slott Report articles from October 21, 2024, and November 20, 2024, attempt to clear up this confusing topic: https://irahelp.com/slottreport/nothing-simple-about-it-3-different-catch-up-limits-for-2025/.
• https://irahelp.com/slottreport/whats-new-for-2025/