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Month: November 2025

Final regs clarify catch-up contribution rules under SECURE 2.0

Posted on by CJadmin25

Remember the SECURE 2.0 Act? It was part of a massive year-end “omnibus” spending package signed into law in 2022. Like many laws, SECURE 2.0 contains provisions that necessitate federal implementation guidance. One area of particular concern for employers has been how the act’s provisions impact the treatment of catch-up contributions to qualified retirement plans. Earlier this month, the U.S. Department of the Treasury and the IRS issued final regulations clarifying these rules.

Two major components

According to the IRS news release, “The final regulations provide guidance for plan administrators to implement and comply with the new Roth catch-up rule and reflect comments received in response to the proposed regulations issued in January.” In actuality, the final regs address two major components of the rules:

1. Required Roth treatment. The “Roth catch-up rule” referred to above is a provision of SECURE 2.0 that requires catch-up contributions made by certain higher-income participants to be designated as Roth contributions. This means the contributions come from after-tax earnings rather than pretax salary deferrals. The final regs stipulate that employees age 50 or above with previous-year wages exceeding $145,000 (an annually inflation-adjusted amount) must make Roth-based catch-up contributions beginning with tax years after December 31, 2026.

2. A higher limit for some participants. The standard catch-up contribution limit is indexed annually for inflation. For example, in 2025, it’s $7,500 for most 401(k), 403(b) and governmental 457 plans, as well as for the federal government’s Thrift Savings Plan. Under the final regs, however, the limit will rise to 110% of the standard amount for eligible participants in SIMPLE plans and to 150% of the standard amount for participants of any qualified plan (including SIMPLE plans) ages 60 through 63.

Changes to proposed rules

The IRS made several changes to the proposed rules in response to public comments. One is that plan administrators will be allowed to aggregate a participant’s previous-year wages from certain separate common law employers in determining whether the participant is subject to the Roth catch-up rule.

Another example of changes from the proposed regs to the final ones is revised guidance on corrections related to the Roth requirement. Generally, these involve either:

  • Transferring a pretax catch-up contribution to a Roth account and reporting it on Form W-2, or
  • Making an in-plan Roth rollover if Form W-2 has already been filed and reporting it on Form 1099-R.

Note that a plan needn’t use the same correction method for all participants, but it must use the same correction method for similarly situated participants. Also, a correction isn’t required unless a participant’s total erroneous pretax catch-up contributions exceed $250.

Further information

If you’d like to start early, the final regs permit plans to implement the Roth catch-up rule for taxable years beginning before 2027 using any “reasonable, good faith interpretation of statutory provisions.” The IRS news release says the final regulations don’t extend or modify the administrative transition period for the Roth requirement provided under Notice 2023-62, which generally ends on December 31, 2025. Contact The CJ Group’s Employee Benefit Audit experts for further information about SECURE 2.0 and for help managing the costs of your organization’s employer-sponsored qualified retirement plan.

© 2025

Writing an AI governance policy for your business

Posted on by CJadmin25

Artificial intelligence (AI) is changing the way businesses operate. Its capacity to gather and process data, as well as to mimic human interactions, offers remarkable potential to streamline operations and boost productivity.

But AI presents considerable challenges and concerns, too. With so many tools available, employees may inadvertently or purposely misuse the technology in ways that are unethical or even illegal. Compounding the problem is that many companies lack a formal AI governance policy.

Few in place

In August 2025, software platform provider Genesys released the results of an independent survey of 4,000 consumers and 1,600 enterprise customer experience and information technology (IT) leaders in more than 10 countries. It found that over a third (35%) of tech-leader respondents said their organizations have “little to no formal [AI] governance policies in place.”

This is a pointed problem, the survey notes, because many businesses are gearing up to deploy agentic AI. This is the latest iteration of the technology that can make decisions autonomously and act independently to achieve specific goals without depending on user commands or predefined inputs. The survey found that while 81% of tech leaders trust agentic AI with sensitive customer data, only 36% of consumers do.

7 steps to consider

Whether or not you’re eyeing agentic AI, its growing popularity is creating a trust-building imperative for today’s businesses. That’s why you should consider writing and implementing an AI governance policy.

Formally defined, an AI governance policy is a written framework that establishes how a company may use AI responsibly, transparently, ethically and legally. It outlines the decision-making processes, accountability measures, ethical standards and legal requirements that must guide the development, purchase and deployment of AI tools.

Creating an AI governance policy should be a collaborative effort involving your company’s leadership team, knowledgeable employees (such as IT staff) and professional advisors (such as a technology consultant and attorney). Here are seven steps your team should consider:

1. Audit usage. Identify where and how your business is using AI. For instance, do you use automated tools in marketing or when screening job applicants, auto-generated financial reports, or customer service chatbots? Inventory everything and note who’s using it, what data it relies on and which decisions it influences.

2. Assign ownership for AI oversight. This may mean appointing a small internal team or naming (or hiring) an AI compliance manager or executive. Your oversight team or compliance leader will be responsible for maintaining the policy, reviewing new tools and handling concerns that arise.

3. Establish core principles. Ground your policy in ethical and legal principles — such as fairness, transparency, accountability, privacy and safety. The policy should reflect your company’s mission, vision and values.

4. Set standards for data and vendor use. Include guidelines on how data used by AI tools is collected, stored and shared. Pay particular attention to intellectual property issues. If you use third-party vendors, define review and approval steps to verify that their systems meet your privacy and compliance standards.

5. Require human oversight. Clearly state that employees must remain in control of AI-assisted work. Human judgment should always be part of the process, including approving AI-generated content and reviewing automated financial reports.

6. Include a mandatory review-and-update clause. Schedule regular reviews — at least annually — to assess whether your policy remains relevant. This is especially important as innovations, such as agentic AI, come online and new regulations emerge.

7. Communicate with and train staff. Incorporate AI governance into onboarding for new employees and follow up with regular training and reminder sessions thereafter. Ask staff members to sign an acknowledgment that they’ve read the policy and perhaps another to confirm they’ve completed the required training. Encourage everyone to ask questions and report potential issues.

Financial impact

Writing an AI governance policy is just one part of preparing your business for the future. Understanding its financial impact is another. The CJ Group can help you analyze the costs, tax implications and return on investment of AI tools so you can make informed decisions that balance innovation with sound financial management and robust compliance practices.

© 2025

Year-end budgeting: Where to look for cost-saving opportunities

Posted on by CJadmin25

As 2025 winds down, business owners and managers are ramping up their planning efforts for the new year. Part of the annual budgeting process is identifying ways to lower expenses and strengthen cash flow. When cutting costs, think beyond the obvious, such as wages, benefits and employee headcount. These cutbacks can make it harder to attract and retain skilled workers in today’s challenging labor market, potentially compromising work quality and productivity. Here are three creative ideas to help boost your company’s bottom line — without sacrificing its top line.

1. Analyze your vendors

Many companies find that just a few suppliers account for most of their spending. Identify your key vendors and consolidate spending with them. Doing so can strengthen your position to negotiate volume discounts. Consolidating your supplier base also helps streamline the administrative work associated with purchasing.

Early payment discounts can be another cost-saving opportunity. Some vendors may offer a discount (typically, 2% to 5%) to customers who pay invoices before they’re due. These discounts can provide significant savings over the long run. But you’ll need to have enough cash on hand to take advantage.

On a related note, how well do you know your suppliers? Consider conducting a supplier audit. This is a formal process for collecting key data points regarding a supplier’s performance. It can help you manage quality control and ensure you’re getting an acceptable return on investment.

2. Cut energy consumption

Going green isn’t just good for the environment. Under the right circumstances, it can save you money, too. For instance, research energy-efficient HVAC and lighting systems, equipment, and vehicles. Naturally, investing in such upgrades will cost money initially. But you may be able to lower energy costs over the long term.

What’s more, you might qualify for tax credits for installing certain items. However, pay attention to when green tax breaks are scheduled to expire. The One Big Beautiful Bill Act, enacted in July, accelerates the expiration of several clean energy tax incentives available under the Inflation Reduction Act.

3. Consider outsourcing

Businesses might try to cut costs by doing everything in-house — from accounting to payroll to HR. However, without adequate staffing and expertise, these companies often suffer losses because of mistakes and mismanagement.

External providers typically have specialized expertise and tools that are costly to replicate internally. For example, many organizations outsource payroll management, which requires an in-depth understanding of evolving labor laws and payroll tax rates. Outsourcing payroll can help reduce errors, save software costs and relieve headaches for your staff. Other services to consider outsourcing include administrative work, billing and collections, IT, and bookkeeping.

Outsourcing is often less expensive than performing these tasks in-house, especially when you factor in employee benefits costs. But you shouldn’t sacrifice quality or convenience. Vet external providers carefully to ensure you’ll receive the expertise, attention to detail and accuracy your situation requires.

Every dollar counts

As you finalize next year’s budget, treat cost control as a strategic exercise — not a blunt cut. Let’s discuss ways to prioritize cost-cutting measures with the biggest payback. The CJ Group’s experts can help you model cash-flow impacts, verify tax treatment and incentives, and evaluate outsourcing options. Contact us to learn more.

© 2025

Year-end planning: 4 steps to trim your 2025 taxes

Posted on by CJadmin25

Now is the time of year when taxpayers search for last-minute moves to reduce their federal income tax liability. Adding to the complexity this year is the One Big Beautiful Bill Act (OBBBA), which significantly changes various tax laws. Here are some of the measures you can take now to reduce your 2025 taxes in light of the OBBBA.

1. Reevaluate the standard deduction

Taxpayers can choose to itemize certain deductions or take the standard deduction based on their filing status. Itemizing deductions saves tax if the total exceeds the standard deduction. The number of taxpayers who itemize dropped dramatically after the Tax Cuts and Jobs Act (TCJA) nearly doubled the standard deduction. The OBBBA increases it further. The standard deduction for 2025 is:

  • $15,750 for single filers and married individuals filing separately,
  • $23,625 for heads of households, and
  • $31,500 for married couples filing jointly.

Taxpayers age 65 or older or blind are eligible for an additional standard deduction of $2,000 or, for joint filers, $1,600 per spouse age 65 or older or blind. (For taxpayers both 65 or older and blind, the additional deduction is doubled.)

But other OBBBA changes could make itemizing more beneficial. For example, if you’ve been claiming the standard deduction recently, the expanded state and local tax (SALT) deduction might cause your total itemized deductions to exceed your standard deduction for 2025. (See No. 2 below.) If it does, you might benefit from accelerating other itemized deductions into 2025. In addition to SALT, potential itemized deductions include:

  • Qualified medical and dental expenses (to the extent that they exceed 7.5% of your adjusted gross income),
  • Home mortgage interest (generally on up to $750,000 of home mortgage debt on a principal residence and a second residence),
  • Casualty losses (from a federally declared disaster), and
  • Charitable contributions (see No. 3 below).

Note, too, that higher earners will face a limit on their itemized deductions in 2026. The OBBBA effectively caps the value of itemized deductions for taxpayers in the highest tax bracket (37%) at 35 cents per dollar, compared with 37 cents per dollar this year. If you’re among that group, you may want to accelerate itemized deductions into 2025 to leverage the full value.

2. Maximize your SALT deduction

The OBBBA temporarily quadruples the so-called “SALT cap.” For 2025 through 2029, taxpayers who itemize can deduct up to $40,000 ($20,000 for separate filers), with 1% increases each subsequent year, meaning $40,400 in 2026 and so on. Deductible SALT expenses include property taxes (for homes, vehicles and boats) and either income tax or sales tax, but not both. The SALT cap is scheduled to return to the TCJA’s $10,000 cap ($5,000 for separate filers) beginning in 2030.

In the meantime, the temporary limit increase could substantially boost your tax savings, depending on your SALT expenses and your modified adjusted gross income (MAGI). The allowable deduction drops by 30% of the amount by which your MAGI exceeds a threshold of $500,000 ($250,000 for separate filers). When MAGI reaches $600,000 ($300,000 for separate filers), the $10,000 (or $5,000) cap applies.

If your 2025 SALT deductions exceed the old $10,000 cap but your total itemized deductions would still be under the standard deduction, “bunching” could help you make the most of the higher SALT cap. For example, if you receive your 2026 property tax bill before year end, you can pay it this year and deduct both your 2025 and 2026 property taxes in 2025. You might increase the deduction further by accelerating estimated state or local income tax payments into this year, if applicable. You could bunch other itemized deductions into 2025 as well. (See No. 1 above.)

In 2026, you’d go back to claiming the standard deduction. And then you’d repeat the bunching for the 2027 tax year and itemize that year.

3. Prepare for changes to charitable giving rules

Donating to charity is a valuable and flexible year-end tax planning tool. You can give as much or as little as you like. As long as the recipient is a qualified charity, you can properly substantiate the donation and you itemize, you’ll likely be able to claim a tax deduction. But beginning in 2026, the OBBBA imposes a 0.5% of adjusted gross income (AGI) “floor” on charitable contribution deductions.

The floor generally means that only charitable donations in excess of 0.5% of your AGI can be claimed as an itemized deduction. In other words, if your AGI for a tax year is $100,000, you can’t deduct the first $500 ($100,000 × 0.5%) of donations made that year.

So if you can afford it, you might want to bunch donations you’d normally make in 2026 into 2025 instead, so that you can avoid the new floor. (Bear in mind that a charitable deduction might nonetheless be more valuable next year if you’ll be in a higher tax bracket.)

One way to save even more taxes with your charitable donations is to give appreciated stock instead of cash. You can avoid the long-term capital gains tax you’d owe if you sold the stock and also claim a charitable deduction for the fair market value (FMV) of the shares.

On the other hand, if you don’t itemize, you may want to delay your 2025 charitable contributions until next year. Beginning in 2026, the OBBBA creates a permanent deduction for nonitemizers’ cash contributions, up to $1,000 for individuals and $2,000 for married couples filing jointly. Donations must be made to public charities, not foundations or donor-advised funds.

4. Manage your MAGI

MAGI is the trigger for certain additional taxes and the phaseouts of many tax breaks, including some of the newest deductions. For example, the OBBBA establishes a temporary “senior” deduction of $6,000 for taxpayers age 65 or older. This can be claimed in addition to either the standard deduction or itemized deductions. But the senior deduction begins to phase out when MAGI exceeds $75,000 ($150,000 for joint filers).

As discussed in No. 2, the enhanced SALT deduction is also subject to MAGI phaseouts. So, too, are the Child Tax Credit and the new temporary deductions for qualified tips, overtime pay and car loan interest. In terms of being a tax trigger, your MAGI plays a role in determining your liability for the 3.8% net investment income tax.

It can pay, therefore, to take steps to reduce your MAGI. For example, you might spread a Roth conversion over multiple years, rather than completing it in a single year. You can also max out your contributions to traditional retirement accounts and Health Savings Accounts.

If you’re age 70½ or older, qualified charitable distributions (QCDs) from your traditional IRA are another avenue for reducing your MAGI. While a charitable deduction can’t be claimed for QCDs, the amounts aren’t included in your MAGI and can be used to satisfy an IRA owner’s required minimum distribution (RMD), if applicable. This can be beneficial because charitable donation deductions (and other itemized deductions) don’t reduce MAGI and RMDs typically are included in MAGI.

Begin planning now

Don’t miss out on both new and traditional planning opportunities to reduce your 2025 taxes. The best strategies for you depend on your specific situation. The CJ Group tax experts would be pleased to help you with your year-end tax planning- we’re ready to get started when you are. 

© 2025

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