- WRS Financial
- Posts
- What's Changed with Qualified Retirement Plans: 2025 vs. 2024
What's Changed with Qualified Retirement Plans: 2025 vs. 2024
William Wells
April 04, 2025
Qualified retirement plans have undergone several important changes from 2024 to 2025, affecting contribution limits, plan administration requirements, and tax benefits. As retirement savers and plan sponsors navigate these updates, understanding the key differences can help maximize retirement planning strategies.
Contribution Limit Increases
The IRS has raised contribution limits for various qualified retirement plans in 2025, continuing the pattern of inflation adjustments:
401(k), 403(b), and most 457 plans: The employee contribution limit has increased from $23,500 in 2024 to $24,000 in 2025. The catch-up contribution limit for participants age 50 and older remains at $7,500, making the total potential contribution $31,500.
Traditional and Roth IRAs: The contribution limit has risen from $7,000 in 2024 to $7,250 in 2025. The catch-up contribution for those 50 and older remains at $1,000, bringing the total possible contribution to $8,250.
SIMPLE IRA and SIMPLE 401(k) plans: The contribution limit has increased from $16,000 in 2024 to $16,500 in 2025, with the catch-up contribution remaining at $3,500 for those 50 and older.
Enhanced Catch-Up Contributions for Higher Earners
2025 marks the second year of implementation for the SECURE 2.0 Act provision that requires higher-income participants (those earning more than $165,000 in the previous year) to make catch-up contributions to Roth accounts rather than pre-tax accounts. This requirement applies to 401(k), 403(b), and governmental 457(b) plans.
Expanded Roth Options
Building on changes introduced in 2024, 2025 continues the expansion of Roth options in qualified retirement plans:
More employers have added in-plan Roth conversion options for 401(k) and 403(b) plans
SEP and SIMPLE IRA plans now offer Roth contribution options
The removal of required minimum distributions (RMDs) for Roth accounts in employer plans is now fully implemented
Required Minimum Distribution Age Changes
The RMD age, which increased to 73 in 2023, remains at 73 for 2025. The next scheduled increase to age 75 will occur in 2033, as established by the SECURE 2.0 Act.
Saver's Credit Transformation
The retirement Saver's Credit is transitioning to the Saver's Match program, which will take effect in 2027. In 2025, the traditional Saver's Credit remains available with adjusted income limits to account for inflation.
Small Business Startup Credit Enhancements
Small businesses establishing new qualified retirement plans continue to benefit from enhanced tax credits introduced in the SECURE 2.0 Act. In 2025, eligible employers can receive a credit of up to 100% of qualified startup costs (up from the previous 50%), with a maximum of $5,000 per year for the first three years.
Automatic Enrollment Requirements
New 401(k) and 403(b) plans established after December 29, 2022, must include automatic enrollment features beginning in 2025. These plans must automatically enroll participants at a contribution rate of at least 3% but not more than 10%, with automatic escalation of 1% annually until reaching at least 10% (but not exceeding 15%).
Emergency Savings Accounts
Plan sponsors can now offer emergency savings accounts linked to retirement plans, allowing non-highly compensated employees to save up to $2,500 (adjusted for inflation in 2025) for emergency expenses within their retirement account structure.
Long-Term Part-Time Worker Provisions
Starting in 2025, long-term part-time employees who have worked at least 500 hours per year for two consecutive years (reduced from three years in 2024) must be eligible to participate in their employer's 401(k) plan.
Student Loan Matching Contributions
Employers can now make matching contributions to employees' retirement accounts based on qualified student loan payments, helping employees build retirement savings while paying down educational debt.
Conclusion
The 2025 changes to qualified retirement plans build upon the foundation laid by the SECURE 2.0 Act and continue to expand opportunities for retirement savings. Plan participants and sponsors should review these updates carefully to optimize retirement planning strategies and ensure compliance with new requirements.
For personalized guidance on how these changes affect your specific situation, consult with a qualified financial advisor or retirement plan specialist.