Keeping You Updated on Tax Changes for 2025
At Williams Group, we’re committed to keeping you informed about key tax changes that can impact your financial planning and your optometry practice. As we look ahead to 2025, here are two important updates we’d like to highlight from the SECURE 2.0 Act of 2022 and the IRS mileage rate adjustment.
Enhanced Catch-Up Contributions: More Savings for Older Employees
Starting in 2025, employees aged 60 to 63 can take advantage of increased catch-up contributions for their 401(k) or 403(b) retirement plans. The maximum catch-up contribution for this group will rise to $11,250, compared to the current $7,500 limit. This adjustment acknowledges the critical need for individuals nearing retirement to bolster their savings during their highest earning years.
Additionally, here are the contribution limits for 2025 across various retirement accounts:
- 401(k): $23,000, with an additional $11,250 catch-up contribution for those aged 60-63.
- SIMPLE IRA: $17,000, with a catch-up contribution of $5,500 for participants aged 50 and older.
- Traditional and Roth IRAs: $7,000, with a $1,000 catch-up contribution for participants aged 50 and older.
- Health Savings Accounts (HSAs): $4,150 for individuals and $8,300 for families, with a $1,000 catch-up contribution for account holders aged 55 and older.
For employers, this presents an opportunity to reinforce employee loyalty and financial well-being. Highlighting these increased contribution limits during employee discussions or benefits meetings can foster a culture of financial security within your practice. Additionally, contributions made by employees not only enhance their retirement readiness but also allow for potential tax deferrals, benefiting both employees and the practice.
Automatic Enrollment: Setting Employees Up for Success
Another notable provision of SECURE 2.0 is the mandatory automatic enrollment requirement for new 401(k) and 403(b) plans established after December 29, 2022. Starting in the 2025 plan year, employers must automatically enroll eligible employees into their retirement plans unless the employee opts out. The initial deferral rate must be at least 3%, increasing annually by 1% until it reaches a minimum of 10%, but no more than 15%.
This automatic enrollment provision is a game-changer for employee participation rates, ensuring that more individuals take proactive steps toward building their retirement savings. For practice owners, it simplifies plan administration and promotes a forward-thinking benefits package that can attract and retain top talent. While automatic enrollment may require some initial setup and communication, it ultimately helps employees achieve financial security with minimal effort on their part.
IRS Mileage Rate for 2025: Plan for Reimbursements
The IRS has announced that the standard mileage rate for 2025 will be 70 cents per mile. This represents an important update for businesses that reimburse employees for work-related travel. Properly tracking and reimbursing mileage at the correct rate not only keeps your practice compliant but also ensures fair compensation for your employees.
Key Takeaways for Practice Owners
These tax updates are more than just regulatory changes; they’re opportunities for your practice to:
- Support Employee Financial Wellness: The enhanced catch-up contributions and automatic enrollment features ensure employees are set up for long-term success.
- Boost Recruitment and Retention: Offering robust retirement plans makes your practice more competitive in the job market.
- Maintain Compliance: Adhering to new rules, like the automatic enrollment mandate, safeguards your practice from potential penalties.
- Optimize Tax Benefits: Retirement plan contributions, both from employees and employers, come with potential tax advantages that can reduce the overall tax burden.
Stay Ahead with Williams Group
Staying informed and proactive about tax and retirement plan changes is essential for navigating the evolving financial landscape. Whether you’re updating your mileage reimbursement policies or implementing new retirement plan features, working closely with our team can ensure you’re maximizing opportunities for your practice and employees.
If you’re ready to discuss how these 2025 updates can impact your optometry practice, or if you need guidance on integrating these provisions into your financial strategy, contact Williams Group today. Together, we can build a stronger financial future for your practice and your team.
