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IRS Guidelines on Retirement Plans Must Be Issued to Independent Workers



IRS Guidelines on Retirement Plans Must Be Issued to Independent Workers

IRS Guidelines on Retirement Plans Must Be Issued to Independent Workers. The anticipated expansion of retirement savings opportunities for independent workers and small-business owners under the Secure Act 2.0, passed in late 2022, faces a hurdle. Despite the legal green light, the Internal Revenue Service (IRS) has yet to issue guidelines, leaving individuals and financial institutions in a holding pattern.

Challenges in Implementing Roth Versions

The new law authorized Roth versions of SEP and Simple individual retirement accounts, crucial for those establishing their retirement plans. However, according to Mark Luscombe of Wolters Kluwer, potential users face difficulties finding custodians willing to set up these accounts.

Benefits of Roth Versions

Both SEP and Simple IRAs, in their traditional and Roth iterations, offer tax advantages. While traditional IRAs allow tax-deferred growth, the Roth variants provide tax-free asset growth through after-tax contributions. The decision to opt for Roth contributions depends on factors such as expected future tax brackets and investment timelines.

Industry Wait for Guidance

Financial service firms, awaiting explicit IRS instructions, are hesitant to proceed with setting up Roth SEP and Roth Simple IRAs. Charles Schwab’s Hibah Shariff notes that the industry is still waiting for IRS guidance before implementing these new retirement options.

Strategic Considerations for Independent Workers

Nicole Birkett-Brunkhorst of U.S. Bank Private Wealth Management highlights the importance of tax-diversified income streams for independent workers. Roth SEP and Roth Simple IRAs, once available, could contribute to building tax-free income.

Current Options and Deadline

Independent workers currently have the option to create a Roth version of a solo 401(k). However, those with non-spouse employees may find Simple or SEP Roth IRAs more suitable once available. Fortunately, the deadline for contributing to Roth SEP or Roth Simple IRAs for the tax year 2023 extends until April 15, 2024.

Options for 2023 and Beyond

While the IRS has not provided guidance, there may still be time for individuals to take advantage of Roth SEP and Roth Simple IRAs for the tax year 2023 if guidelines are issued early in the coming year. However, solo regular and Roth 401(k) contributions have a year-end deadline, urging individuals to make informed decisions promptly.

Detailed of Current Options

The article further provides detailed information on Simple IRAs, SEP IRAs, and Solo 401(k)s, outlining contribution limits, employer responsibilities, and considerations for each retirement option.


The delay in IRS guidance poses challenges for independent workers eager to explore expanded retirement savings options. As the financial industry awaits clarity, individuals must stay informed and consider alternative retirement plans while keeping an eye on potential developments in IRS guidelines.

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