Name: Secure Act 2.0: What Financial Advisors Need to Know About Roth Catch-Up Contributions
Uploaded: 2026-03-26T19:31:31.496Z
Duration: 55 min
Description: Secure Act 2.0: What Financial Advisors Need to Know About Roth Catch-Up Contributions

Transcript for "Secure Act 2.0: What Financial Advisors Need to Know About Roth Catch-Up Contributions": Well, hello, everyone, and welcome to Secure Act two point o and what financial advisers need to know about Roth contributions. Thank you so much for joining us today. My name is Kayla, and I'll be your host. Now our webinars might look a little different for you now. We're in a brand new platform. So, of course, before we jump in, I do wanna give you a quick rundown of the webinar tools before you. So if you've got any questions, go ahead and pop those into the q and a tab on the right hand side of your screen. We'll be actively monitoring the q and a, and we'll do our best to address as many as possible towards the end of the session. If you'd like to connect with fellow attendees, head on over to that chat tab on the right hand side. Now if you're looking for extra resources, check out the docs tab. You'll find helpful links related to the session today. Lastly, if you'd like closed captioning on your screen, please click on the CC on the bottom right hand corner of your video stream box, and you can change the language as well. Alright. So let's get started. Now, of course, we have our legal disclaimer. So please read this thoroughly if you can. Our webinars are not legal advice and should only be used as a resource. Okay. So what are we covering today? Let's get through the agenda. So regulatory changes and trends for 2026, we're gonna cover retirement, tax law, AI policy, and employment law. We're gonna see what the impact on businesses is and actions your clients can take, and, of course, additional resources towards the end. Alright. So now I would like to introduce our speaker, and we have Zach Keep. And Zach is the compliance risk manager for Paycor and Paychex and has been involved in both the retirement industry for nearly fifteen years and has extensive experience navigating compliance issues for both four zero three b and four zero one k plans. So in his current role, Zach was closely involved with the rollout of the paychecks pooled employer plan. So without further ado, I'll pass it over to Zach. Okay. Kayla, thank you so much. That was a great intro, and, I'd like to say thank you to everybody in the audience for being here today. You know, I I think we're gonna cover a little bit more today than the title might have led you to believe. Why is that? We're gonna talk about Roth. We're gonna talk about retirement plans. Don't get me wrong. But, gang, there is a lot going on from a legislative and regulatory standpoint and a geopolitical and, technological standpoint. We're gonna touch on a little bit of all of that today. And what, what my goal today is to is to do is to really help you better service your clients. Because at, at Paycor and at Paychex, we know that often you are the face of benefits for your client, and they're gonna come to you with all sorts of questions. So my hope is that, I can arm you with some of the tools and knowledge to answer those questions that we all know come your way. So with that in mind, as we talk, I know Kayla mentioned this, drop something in the q and a. I'm gonna do my best to, to keep an eye on it as I drone on at you today. And, if there's some questions in there that I can answer as I go, I'll try to do so. If not, there'll definitely be time at the end, and we'll see if we can get everybody out of here a little bit early. So with that, let's jump right in. The first thing that I wanna talk about is a topic that's near and dear to my heart, and that is retirement plans. Most of my career has been in the retirement space, four zero three b's, four zero one k's, all of the alphabet soup and number soup that we all know and love. And, boy, it has been a fascinating, you know, at this point, close to a decade in the retirement plan world. I often say that four zero one k plans, they're tremendous. They're the best thing going, but they're they do have a little bit of an identity crisis. They are something that started out once upon a time as a a supplemental plan to a pension back in the days when pensions were were were common. Certainly not common today, but they were the order of the day years ago. And then four zero one k's grew. They expanded. They became something new, and that is the primary retirement savings vehicle for most Americans today. And then around about the time COVID hit, there was a a really landmark piece of legislation called the secure act, setting every community up for retirement. Secure one point o and later, just a few years later, secure two point o rewrote retirement. It expanded four zero one k's again, both who gets them, what they do, and also kind of moved the four zero one k into some some new territory. You know, four zero one k's, all of a sudden, we started to see, you know, new types of distributions, new ways of accessing money that weren't there before, almost a little bit of the ATMification of four zero one k plans. We saw new, emergency savings provisions, new distributions for childcare, things like that. So four zero one k's continue to develop. And even today, we are still realizing the impacts of what secure one and secure two did. And just last week, down in DC, and, I heard people talking about secure three point o. I'm not sure if I need that much more gray hair. So we're gonna limit it to secure one and secure two, starting with something in secure two point o, and that is the transition of the savers credit to the savers match. Now everybody who can hear me, this is something that is going to affect us, and it is going to affect us soon. It will probably impact all of our mutual clients. And the savers credit, this isn't something that's new by any means. You know? The savers credit has been around for a pretty long time. It it has really primarily benefited, I think, the the lower, maybe the middle income savers. This is a tax credit. It is a a way of getting some money back come tax time, getting that back to an individual who utilizes a retirement plan. The thinking was when this was conceived, it's gonna incentivize people to use their plan. I think that's wonderful. I think it did a good job of that. But with secure two point o, I remember when it passed in sort of the waning days of '22, you know, I I remember reading through it as the Christmas music was playing and thinking about, wow. The savers credit transitioning to the savers match is gonna be a problem for industry to solve, but not for a while, and we probably don't need to worry about it too much. Well, now we need to worry about This is something that is slated to go live in 2027. The savers credit will no longer be the savers credit. Instead, it is going to be a match that goes into the savers four zero one k plan. A federal matching contributions deposited directly into that IRA or maybe that four zero one k. And great idea. I love the concept, but there are many questions that need to be answered here. The big question is how is this going to impact employers? And right now, we, industry, you and me as a whole, we do not know the answer to that question. We do not know, for example, how is a participant going to designate what retirement plan they want their match to go to? We both know, all of us in Paychex, Paycor, and, and the advisers who can hear my voice right now, we know that participants don't always know which retirement plans they have. We know that there is a retirement lost and found that is being built even as we speak today because participants lose track of plans. So we don't know how the participants will designate their retirement plan that receives the match. We don't know probably more importantly, for for us in the industry, we don't know how uncle Sam expects these dollars to get into the retirement plan, and that is a lot of logistics. You know? Right now, it is, a few months to go, but we know that 2026 is going to move quickly. And industry is going to need to build infrastructure to accommodate this match. Right now, as it stands today, if we're watching this in the future, things could have changed. But today, industry is very much waiting on guidance from treasury on how this match is going to happen. And my understanding is just from some of the conversations that we've had in DC, that guidance is likely to come any day now. So as you think about this or if you're watching this webinar down the line, I would say double check what's going on with the savers credit because this is going to be the story in the '26, certainly the story in the 2027. How do dollars get into the four zero one k plan? What should we tell our clients to do? Well, be prepared. That's all we can do for now. Be prepared to answer questions from your employees. I think a lot of employees have maybe relied on this credit. They're still getting the money, but they're getting it in a much different way. The other thing that, we should do, as I mentioned before, is monitor for implementation guidance. It's coming, folks. Maybe by the time you listen to this, it could already be here. So be aware. Be ready to partner with your clients. Be ready to partner with third party administrators because we are going to need to solve this problem together, and we're probably gonna need to solve it as an industry in a real hurry if this is gonna become effective in 2027. So more to come with the savers credit turning into the savers match. That will be the big story. The other big story, I think, is mandatory Roth catch up or what we in industry have taken to calling Rothification. Rothification is a very interesting idea. It's got it's got kind of a history, to tell you the truth. It has been floated a number of times with a number of different legislative packages. I've heard some in industry say it's a bad penny. It keeps coming back around, and it finally became law with the passage of secure two point o. What is Rothification? Well, let me answer why first, and then we'll talk about what. Why is really a pay for for Secure two point o. There was a lot of infrastructure that the government had to build and is still building. Witness that, savers credit that we just talked about. You know, Rothification is how the federal government is going to pay for. It's called a pay for, actually, insecure two point o. It's gonna be covered by Rothification. Now not everyone is going to be impacted by Rothification. It's going to impact a fairly narrow tranche of employees, but a very important tranche of employees. So who needs to worry about Rothification? Well, right now, individuals who are we call high earners, not to be confused with highly compensated employees, which for those of you who are four zero one k nerds like myself, we all know HCEs means something different. High earners is tied to a different income threshold. Those individuals who make $150,000 a year or more in Social Security wages in the prior year must make Roth catch up deferrals. Now that's a bit of a mouthful. So I'm gonna try to unpack this and unpack the impact because it's going to be a big impact. First, $150,000 a year. Well, if we look certainly in the the SMB space, those small and medium sized businesses, you know, the folks who are making a $150,000 a year often are the decision makers at the client. They're often the folks who who might hire and fire both of us, and these folks have certain things that they want to do financially. So those are the ones who are affected. Not everybody. If you're making $75,000 a year, this won't impact you. So the first layer of qualification is income based. The next layer are those who make catch up deferrals. Now not everyone is eligible for a catch up deferral. In fact, you need to be over the age of 50 to qualify for the increase in your base four zero one k limit. We all know if you're over age 50, you can automatically shelter a little bit more to catch up to make sure that, you know, if you haven't utilized your retirement options as much in the past, you can do it now in those remaining couple of well, probably now a couple decades before retirement. So not everyone, you need to hit that income, and you need to be of the age, and you need to actually be making those catch up deferrals. But once you qualify for those three factors, once you jump through those three hoops, congratulations, You must make those catch up deferrals as Roth. Not all of your deferrals. Your base limit, your four fifteen limit, for those who are familiar with the terminology, can still be standard pretax deferrals. Only that portion which is attributable to your catch up will need to be Roth. That means taxes up front. That means uncle Sam gets the money today, and that's how they're gonna pay for a secured two point o. So not gonna impact everybody. Not gonna impact most everybody, but the ones who are gonna be impacted are probably the folks that that we collectively in industry wanna keep happy. And, gang, it's important to note that if a plan does not permit Roth deferrals, no catch up contributions can be made. So there's a few things that we need to think about because this is the law of the land today. So we jointly, our clients, our accountants, advisers, folks like me in industry, we need to think about, hey. Who's gonna be impacted by this? Number one, are there employees at a given client who will be impacted by this? And the answer is probably yes. Then we need to ensure that the four zero one k plan offers are off deferrals. That's the next big hurdle because not every four zero one k plan does. If a four zero one k plan was created ten, fifteen years ago, it might not be up to date with some of the more innovative things like Roth deferrals, and now is the time to make sure that plan document is updated. In fact, probably a few months ago was the time to make sure that that plan document permitted Roth contributions. The next thing we need to do is monitor employee deferrals for compliance and, probably most importantly, prepare to answer questions from the high wage earners who are catch up eligible. They will come to us when they see their deductions change. And I can tell you from years of working with plan participants, this is front of mind for the demographic in question. Their ability to utilize that catch up is key. It is a key benefit that, that they perceive their employer is offering. Federal benefit, employer benefit, however we wanna look at it, they know about it. They watch for changes. And, boy, do they ever use these deferrals? So that's what we should do today. Most critical, I think the two things we need to do, prepare for questions and certainly make sure that plan offers Roth. Because, otherwise, we are in a situation where we are either out of compliance, we don't wanna be there, or we're telling our clients, hey. Nope. Sorry. No catch up for you, which is not a message that anyone wants to hear. So moving on, the last thing that I wanna talk about is mandated workplace retirement programs. These are growing like wildfire. Many states currently have a retirement mandate in place. This is something that happens at the state level, not the federal level, but individual states are increasingly, they have been for years, but they are now saying or have been saying, hey. If you are an employer, you must you absolutely must offer a retirement plan. Now what happens then will vary state by state. Some states, California, I think, one of the pioneers, one of the infamous ones, they initially tie this to employer size. You know, if you're an employer who has more than a 100 employees, you need to offer it now. If you're between 50 and a 100, it's next year. Between twenty five and fifty, the year at, etcetera, etcetera. Sometimes it's a staged drawdown. Other times, it's a blanket mandate. But more and more, we have a number of states that are current. We have many more states with pending programs. I think it is fair to say roughly half of the states in the union at this point either have entered into, are rolling out, or are at minimum contemplating a state retirement mandate. And what's interesting and here I think we have a real opportunity as advisers and as administrators who are here to help our client base. You know, these state programs typically are IRA based. They're individual retirement plan based. And I think this is an advising opportunity for all of us, quite honestly. Because when the states rolled these plans out, they they worked with an IRA provider, and the states had had an agenda here. The agenda was a good one. It was to help people get a retirement plan, and an IRA is certainly better than nothing. But if you speak with the the folks who actually drafted this legislation, and I have in a number of cases, their real hope for this, their real hope here was to drive employers not to the state IRA, but to drive them to the four zero one k plan. And here, we've got a little bit of a a perfect storm, a confluence of events because we've got states saying, hey, employer. Even if you're a sole prop, you need to offer a retirement plan. And then at the federal level, we're gonna go back to secure two point o because, secure one point o and two point o. So bear with me while I try to explain what's happening here. First, with secure one point o, we had the advent of something called pooled employer plans or PEPs. What this is, very simply, think of it as a a box of employers, an aggregate of employers who opt into, an umbrella four zero one k plan, and they farm the fiduciary risk out to what's called a pool plan provider, Paychex, Paycor, pool plan providers. The compliance people like me don't get to sleep at night, but the employer turns all of their fiduciary risk over to someone else. And at the same time, thanks to secure two point o, there are very significant tax credits that are available for employers starting a four zero one k plan. So what do we have? From the states, we have let's almost call it a little bit of a stick. You must start a four zero one k plan. I'm sorry. You must start a retirement plan of some kind, or there's penalties. From the federal government, we have the carrot. You can shed the fiduciary risk. You can get tax credits that are gonna substantially, probably, totally offset your start up costs. And, oh, by the way, you can offer a better plan. And there is no question. A four zero one k plan is a better plan for the employee. It's got higher contribution limits, more flexibility, better investments. So employers, what we see and what I would encourage all of you to discuss with your client base, if they are in a state mandated state, maybe even if they're not, take a look at the four zero one k plan. So with that, we're gonna switch from retirement to tax law, and this has been exciting as well. Everybody knows we have got the the one big beautiful bill. This is the the banner provision late last year. Obviously, it it passed, and it does a lot of really creative things. Once again, all of you are probably going to get questions about this. So I wanna take a moment and talk a little tiny bit about what's going on from a tax law standpoint. The things that everybody really talks about in my experience, the questions we get from clients I'm gonna guess the questions you get from clients too. No tax on tips. No tax on overtime. This is a this is the banner provision in in the big beautiful bill. And I've gotta say it's a little deceptively named because what we're really talking about here is not no tax on tips. It's not no tax on overtime. Individuals are still paying the tax. Individuals are still reporting. What they're basically getting is the ability to claim these dollars when it's tax time. This is this is still money in the employee's pocket. Absolutely. But I I don't know if it's really as immediate as no tax on tips, no tax on overtime. I think it could have been named a little bit better. I know why government did it the way that they did. We're gonna talk about some of the interesting things that have been said about this after the fact. But let's sort of explore together how this actually works. There's guidance. There's gonna be continually guidance coming out on this. And, you know, there's some different requirements for both of these. In both cases, individuals are still paying, still reporting. For tips, it's going to be limited. It's up to $25,000 a year. And probably importantly, it's going to be for individuals or I should say, maybe not individuals, but for classes of job who customarily receive tips. What does that look like? You know, I think if you are a waiter, if you're a a caddy, maybe something like that, this is gonna be a good thing for you. For me, as a a salaried individual working in compliance, I would probably have a tough sell if I went to my boss and said, hey. Let's consider $25,000 of my income to be a tip. That's not gonna work for me. So one thing we're gonna need to be on guard about is is not letting folks get too creative with this. Obviously, that's a humorous example, but we all know, and I think there's gonna be guidance that really kinda limits who is a tipped employee and who is not a tipped employee. The other thing that we wanna think about is the overtime piece. There's limitations on this as well. It is not no tax on overtime. It's really the best way I could describe it is a tax credit for the time and a half portion. So let's say you your rate is 20, your overtime rate is 30. Well, there's, quote, unquote, no tax on that $10, and that's gonna be limited to 12 and a half thousand dollars a year. So there is some math to do, math probably for employees to do. And I think many of us here are gonna be in a position where we will be helping employees figure that out whether we want to or not. So know the limits on this. The other thing and here's one to watch. You know? Well, I guess two things we should talk about. You know? Number one, not every state is following the federal government's lead. In fact, many states are not. So from a federal standpoint, this is a benefit. It's gonna remain a benefit at least for a while. We'll talk about that too. But federal benefit, the states haven't always followed the direction of Uncle Sam. Some of them have gone in a different direction and will still be taxing these types of earnings. So all of us are going to need to know as we talk to our clients, hey. What is going on at the state level? And the final piece, I alluded to this a moment ago, this is not forever, or at least it's not forever right now. This is going to be in place between 2025 and 2028. So there is an expiration on this. As as a little bit of a a political watcher, as all of us in compliance are, I think this is gonna be a fun one to watch. I think this is gonna be incredibly popular. I think a lot of, a lot of taxpayers are really gonna like this. So it will be fascinating to see whether this is extended beyond the 2028 sort of drop dead date or not. Too soon to say, given how popular, you know, I could easily see this lasting longer and and kind of living beyond its originally conceived expiration date. But, honestly, only time will tell. So, hopefully, in a few years, we'll be having this conversation again, and we'll have a better sense about, what's gonna happen with no tax on tips or overtime. What should we do today as advisers? Well, we should review the new rules with employees. We should get in full compliance starting with most recent w twos, and we should be prepared as employers or as counselors of employers to help with reporting questions. Now there's another thing we need to be on guard against, and that is what I would call creative math. And I have seen this is worth talking about just a little bit. I have seen from some corners of government some recommendations that I think make sense, but we need to be careful of as advisers. And what those recommendations are are, hey. An employee and this has come from some fairly high folks in treasury. I've heard it from a number of corners saying employees should today adjust their withholding because they know they're getting this credit, adjust the withholding, realize the benefit today. I get that. You know, I I get the thinking behind that. I think it kinda makes sense from one standpoint in that it's gonna help employees get the money in the pocket sooner, which is obviously a good thing. Hard to argue with that. I think, politically, it helps taxpayers, voters realize the impact of this very beneficial provision sooner. It's objectively a smart idea, but devil's in the details. You know? I I think we need to be prepared to almost help our clients make it's almost like a fiduciary decision. Right? We need to be careful with this because I'm gonna use the, the example of being a golf caddy. I'm talking to you today from sunny Rochester, New York, and there's a very a person who's maybe expecting a certain amount of tips over the course of the year could be surprised. Maybe the snow stays on the golf course until July. Let's hope not. Maybe it rains all year at the marina, and there's not as much opportunity for tips. And then at tax time, the employee is left with a burden they didn't expect. So an employee can can certainly use this as an opportunity to adjust withholding, but the employee should also be strategic in what they're planning on and what is actually going to be their case. It's a it's a high risk, high reward type of choice. So we'll now pivot yet again, and we're going to do a little bit of, of a step back. We're gonna talk about the the the now infamous overtime rule. This is you know, I think it's less a story of policy. It's less a story of legislation, and it's honestly more of a more of a story of legal reset or maybe even a little bit of legal whiplash. In 2024, we all know that there was, an initiative that was vacated by a federal court, which brought us back to the 2019 overtime rule. So right now, today, even though the 2024 paradigm is what is technically the law of the land, we are still at the twenty nineteen threshold thanks to that court decision. 2019 threshold, of course, $684 per week. That is where we stay today as I say this. Now that said, this is something that we are going to need to watch what is happening in the courts. It is something that, you know, for right now, we could see a change at any point. We could go back to the 2024 paradigm. And it's important to remember, this is different, folks, than the no tax on overtime provision. That is law. That is happening. It's happening today. Different than the federal overtime rule. So something to think about, something to watch as we are all counseling our client base. Another thing that we're going to need to think about is the work opportunity tax credit or the WOTC. This has been around for a long while. This is nothing new, but it has realized some pretty significant changes recently. WOTC dates back to the mid nineteen nineties. For anybody who's not familiar with it, this is essentially a tax credit for employers. It is a pretty significant one at that. I think it's designed to incentivize the hiring of, you know, some underprivileged groups, folks who've been convicted of a felony, veterans, long term unemployed, things like that. For right now, that is a sunsheaded provision. Anyone who began work after 12/31/2025, this provision, the WOTC, is not going to be available for that individual. So the the filing window is essentially kind of closed. Now with that said, this is one of those provisions that I think is is popular just like the no tax on tips, no tax on overtime was and is popular. So as we move through 2026, you know, number one, we better file now. The other thing that we need to do as advisers of our client base is watch for updates. I think there will be updates with this in 2026. There's already some legislate legislation that is proposed. I could easily see it being proposed in 2026 with a retroactive date to 01/01/2026. We just don't know. We don't know what the makeup of congress is gonna be like. We don't know what kind of traction it's going to gain, but this is something that is, at least in many corners of the government, a historically popular provision, and it is beneficial for small business. So I could see this gaining some traction where where maybe other other agenda items, let's say, politically might struggle a bit a bit more. It's essentially hard to argue with things that help small business, and this is broadly, I think, perceived as a beneficial to small business provision. So all of us sort of need to become politicos, I guess, and watch for what's happening. Watch for guidance on that, Rothification piece. Watch for guidance on the transition of the savers credit to the savers match. Watch for guidance on the overtime role, and watch for guidance on WOTC. We're here to help you with that. We will always help publicize things like that, and I'm sure we'll be offering webinars on it as guidance becomes clear. So let's talk about the next one. AI. There there's this thing called artificial intelligence. I'm sure not everyone has heard of this watching the news. This, of course, is the story of the year, and it'll be the story of next year as well. AI is here. We're all using AI whether we know it or not. And because of how just how incredibly popular this is, it's all that anyone is talking about. I defy anyone to turn on the news without seeing something about AI. It is going to attract legislation. We all know the political class likes to legislate what is visible. Few things are more visible right now, so this is going to affect all of us. It's going to affect you. It's going to affect me in the course of our jobs. Going to affect what our clients need to do. And so far, the federal government has been I don't wanna say they've been quiet, but there hasn't been a lot that's happened with AI. There's been a lot that's happened, but maybe not the most significant things with AI. Obviously, earlier, we had we had the the debate. Was there going to be a moratorium on state legislation of AI? That was the big debate. That did not pass. The federal government did not pass any kind of a there was gonna be a ten year moratorium on the development of state AI legislation. That didn't pass nor am I really clear on whether that could pass, whether that would withstand the inevitable challenges. We don't know. As it stands today, states can and they are. We'll talk about that in a moment. But states can and are developing their own AI legislative paradigms. The federal government has done some things. There was an executive order passed in, late twenty five that established what's called an AI policy framework. What is this? A lot of people have confused it with a moratorium on state legislation. It is not that. It's something else. What this late twenty twenty five executive order did is mandate the establishment of infrastructure to to kinda prosecute a campaign against onerous state AI legislation. And I I think the Trump administration probably has some states in mind with this. I think that's gonna be a big story in 2026 as there will be battles between some of the states that have really been innovative in AI legislation and the federal government. The goal of this executive order is to reduce complexity and promote US dominance in the industry. I think there are some funding restrictions in there. There's really not much about protection of harms from AI. However, just, just very recently, not even mentioned on the slide here, the Trump administration did release some additional guidance to congress about what it wants to see. And interestingly, what is in that guidance is things like protecting children, protecting privacy, and also fostering innovation very much in line with what we're seeing from the states. So with that, I wanna talk a bit about what is going on at the state AI level because that is much more interesting. We have a couple layers. Here in my home state of New York, other states like California, we've seen some pretty significant pieces of AI legislation that literally hold AI providers responsible for the harms caused by their AI if any harms are in fact caused. But those are kind of limited to the very largest AI models, what are called frontier AI models. And we all know those. Those are the the clods and the the open AIs and the chat GPTs. These are the frontier models. If we have, if one of our clients has a chainsaw repair shop, small engine repair, something like that, then maybe they use an AI that that that diagnosis what's wrong with a a small engine. I don't even know if that exists, but we'll use that as an example. They don't need to be worried about these massive state AI pushes. And outside of a few states, New York, California spring to mind where they have really gone above and beyond, most other states have already started to regulate AI, and they've done that in a few different ways. Deep fakes and manipulated content, particularly of politicians, those are are obviously being pretty aggressively regulated. Another big one that we see disclosure requirements. So, for example, in many states, thankfully, I you know, you can't create a a Zachary Keep AI that does webinars on my behalf. I know I'm personally very glad about that. More to the point and probably more aggressively regulated, you cannot create an AI that pretends to be a licensed professional. So an AI cannot, for example, pretend to be a doctor or a lawyer. We also see a lot of regulation around child safety, which I think is a difficult thing to argue with. And in some states, California, it was a very early adopter here. We see an expansion of the existing state regulatory paradigm. The CCPA was a very powerful, very well known privacy regulation. In many respects, it almost legislates privacy for the entire country because California has an outsized impact on the the state of the union, so to speak. And CCPA, those privacy protections have been expanded to cover AI models. And then last but not least, this is an emerging one, you know, automated decision making. Here's one I think that could affect some of our clients. You know, if your client base has, some some customer service happening and maybe they they have an AI that listens to and scores customer service interactions, well, the AI can't decide to fire someone, for example. The AI can't decide to hire someone. So this, again, is already incredibly dynamic. Every day, states are passing more and more AI legislation, and, we all need to be aware of what that is and how to comply with it. So it is, it's a hot topic. It will continue to be a hot topic. What do we need to do? We need to stay ahead of the changes just like everything else. We need to monitor those federal preemption efforts. We need to track legislation, particularly at the state level, and we need to be prepared for the federal government to do something. Will it happen in 2026? Well, if if I knew, I'd probably be a much richer man, but I do think we will see some traction start to begin with actual federal overarching legislation as we move through the the middle of 2026 here. So keep an eye out and be ready to pivot quickly because this is changing just changing by the week. Now I want to pivot yet again in the the sort of waning time that we have together today and talk a bit about employment law. This is a big one as well. It affects all of us. And I think the first story or maybe stories that I wanna tell are a story of state and maybe even local legislation, maybe even some fragmentation depending on how you wanna look at it. We see a lot of legislation in the paid family and medical leave space. States increasingly are mandating it. States have different requirements. Even some localities, municipalities are starting to get on the game. So as advisers, we should be prepared to help our clients, our employers that we work with register with state, possibly even local programs. We're gonna need to help folks budget for and remit payroll contributions and help manage employees taking leave coordinating with state benefits. We're gonna probably need to be prepared to assist with handling an accrual of tracking, getting the notices out there, and record keeping. And now might be a good time to consider private plans as an alternative to state programs just from a standpoint of easing that compliance burden. So with medical leave, also with paid sick leave, it's kind of the same story. State local changes. So depending on where your employees are located, not where you are located, but where your employees are located, there could be different requirements. This is again, just like with, with medical leave, this is a a case of fragmentation. So there's going to be a degree of almost client training that we're gonna need to be prepared to do. We might need to help our clients develop the meta skills to do this on their own. And one thing I think it's important to consider is is there an opportunity to refer our client base to products that are going to help them just do this as opposed to need to navigate this increasingly fragmented landscape on their own? And then finally, let's talk about one that's near and dear to my heart, and that is worker classification. This is, is honestly another another case of, of legislative, roller coaster. We've seen a couple of different things here. In 2021, there there was sort of an effort to simplify the the calculus of who is a ten ninety nine and who is a w two employee, who's a contractor versus who's a a standard employee. And that 2021 paradigm made it, I think, a lot easier to to be a ten ninety nine employee. Well, 2024 updates to FLSA changed all of that. We are now back to actually a six factor. It's called an economic reality test. I'm looking at things like, do they control their work? What's their permanence like? What's what kind of skill and initiative are they exercising, etcetera, etcetera, etcetera. I think it is harder. It's certainly not impossible, but the the the qualifications to be a ten ninety nine employee are a bit tighter than they were if we were having this conversation in 2021. And, obviously, there is some risk here. If we misclassify workers, it could easily lead to tax liability issues, fines, other business risks, possibly even, legal risk, quite honestly. So what do we need to do? I think employers and us as the folks who are here to help employers, wouldn't hurt to do an audit, a classification audit, and a little bit of a job analysis effort to kinda make sure that folks are classified where they should be. Make sure those who are ten ninety nine are actually ten ninety nine, not under the old paradigm, but under the new paradigm. We're also gonna wanna watch very carefully what is happening in that legislative environment and also what's happening in the enforcement environment. It would not surprise me to see workers kind of shifting. Not all, but some workers are gonna be on that borderline between October and w two, and they might shift into a different place as we move through the the current calendar year. So with that, before we go for some questions, I want to talk a little bit about what Paycor and Paychex are here to do for you. You know, number one, our goal is to provide easy to use human capital management and retirement plan solutions. Whether that's a PEP or something else, we are here to provide you with those tools that allow you to say to your client base, hey. Just do this, and you have less to worry about. Typically, we can very quickly and easily set up plans, oftentimes within forty eight hours. And, speaking as, as somebody who initially came from the paycheck side, very impressive what Paycor is able to do with plan setup. Sales opportunities from paychecks and Paycor Paycor wholesalers. We've got some strategic report I'm sorry, strategic support from plan design right down through you know, we have tools that will help you identify whether you're in a state that has a state retirement mandate. And if you are, again, I'd be remiss because it's near and dear to my heart not, emphasizing the pooled employer plan. Paychecks actually offers the, the one of the largest pooled employer plans, I believe the largest by number of participating employers with almost 41,000 adopting employers built at scale, streamlined administration. And, you know, as a compliance guy, I hesitate to say it, but it really is sort of an out of the box solution that's been very successful for a lot of employers, $2,400,000,000 in assets so far. So what we're here to do at Paychex and Paycor is to make your job easier and to offer the solutions that you need to to guide your clients and to get your clients perhaps in a product that that is going to to answer all of their questions, make it so they don't even need to ask the questions or at least maybe ask the questions to me in compliance as opposed to you. So maybe I shouldn't be recognizing that after all. I don't know. But, we love getting those questions, and we're here to serve you and your client base. So with that, I know everyone's probably anxious to get out of here for the day, but, I do know there are a couple of questions that have come through. I see one in the q and a space. Ryan Miller, my clients are worried about tracking the mandatory Roth contributions and switching them over once they hit the limit. Does Paycor have a way to automate the transition from pretax to Roth for the mandatory catch up if there's no integration? Well, if I follow that question, that's that is the crux of the issue. Right? You know, with the advent of Rothification, this is a new compliance burden on employers who never had one before. You know? Maybe if an employer is is doing it themselves, they are the plan sponsor, They're the fiduciary for the plan. They now have a burden they never had before, and that is watching how much everyone contributes. And when they cross that four fifteen limit, if they're otherwise eligible, turning that individual over to Roth deferrals. So short answer to this, yes. And in a couple of layers, Ryan, you know, number one, I would say maybe maybe we wanna talk about getting them in the PEP. I I will say as a compliance guy, I'm not here to sell anyone on anything. But with a PEP, that's going to happen automatically. If they are running their own plan, and I don't know if that's the case here or not, I think a good conversation would be I'm gonna turn this a little bit broader. You know, Paycor certainly can help with that more broadly. I know there is other payroll providers out there. The question is, can your payroll provider help with that? Because they should know how much the individual makes. Right? And they certainly should know how much they've contributed to a four zero one k. So, yes, that is something we can assist with, and I think it's always a, a good question to to ask. There should be the tools to do that. Another q and a that I see here. What are some common misconceptions about Secure Act two point o that advisers should clarify for their clients? Well, I'm gonna I'm gonna start right where I left off with Ryan a moment ago, and that is Rothification. Just because this is the law of the land, just because we all need to deal with the Rothification of catch ups does not mean that your plan document permits Roth. If you take nothing else from my conversation today, think about whether your client's plans permit Roth contributions because not all of them do, especially those older plans out there. So that is a common misconception. Oh, because the law says it's required, it's going to happen automatically. Well, it should, but it won't happen if the plan doesn't permit Roth contributions, or it shouldn't because then you're out of compliance. So make sure that, plans permit Roth because secure two point o does not necessarily build infrastructure where the plan document, which is a a key piece of information, the plan document doesn't support that infrastructure. There's nothing to build the Skyscraper on, and nothing's going to happen. So we are going to, to lose that if the plan doesn't permit growth. Common misconception number one. Common miss other common misconceptions, you know, I think I see a lot of confusion about those tax credits. I get lots of questions about those because they are generous tax credits. Secure one point o started out with a 50% offset. I often get how much does secure two point o offset. And the answer there is, even more generous, secure two point o offsets 100 of startup costs. And, also, you know, I I'll I'll kinda close with this, I guess. Secure two point o's tax credits go further, gang. It it goes further in that it incentivizes employers not just to offer a plan, not just to get those start up credits, but also to offer a rich plan for their employees. In other words, secure two point o has a a tax credit that offsets employer match. We all know four zero one k plans typically match. And for the first few years, at least, of those new matching contributions in a new retirement plan, employers can get an offset of that as well. So just know that secure two point o does a lot, and I think the the takeaway there is think about whether or not there's a a decision to be made, especially with those state plans. Is there a decision to be made between four zero one k and the state IRA? I think increasingly for many employers, the calculus goes towards the four zero one k question or the I should say the four zero one k answer. So, with that, Ryan, I do see that, see one more question from you. Does Paycor have a way to automate the transition? I believe the answer to that is yes. I'm gonna ask if you wouldn't mind dropping your email to us, and, I will have a member of the team here get back to you and, get you kind of a a more detailed walk through with that. So with that, I know we are about at the one hour mark. I I'm going to to kind of wrap it up here, and I see my colleague Kayla is on the line. Kayla, don't know if you have anything further that you wanna say, but, I'll thank everyone a. final time. Thank you so much for being here today. Thank you so much. We love having you on the program. Thank you for all of this knowledge and your experience here, and there's a lot of moving parts. So I appreciate you breaking it down for us. But thank you all for spending some time with us today. Remember, this is recorded, so you will get an email with the link to the recording shortly. But thanks again so much, and we'll see you all at the next webinar. Take care, everyone.