Key insights
- The SECURE 2.0 Act introduces more than 90 changes aimed at enhancing and protecting retirement security.
- Several notable aspects of the new law may impact benefit plans, including student loan payment matching, automatic enrollment and increases, and penalty-free withdrawals.
- Understanding these changes and how they can enhance retirement plans can help organizations prepare for these updates and maintain compliance with the new requirements.
Stay informed of significant changes to retirement savings.
The SECURE 2.0 Act makes it easier to save for retirement, but its many changes don’t just impact individuals — there is a lot organizations need to know.
The intent of SECURE 2.0 is to increase retirement savings and simplify and clarify retirement plan rules. The act introduced more than 90 changes to the original law to enhance and protect retirement security. Plans must include SECURE 2.0 changes in their documents by December 31, 2026, although some changes take effect before this date.
Review some notable aspects of the new law that may impact your organization’s employee benefit plans.
Student loan payment matching
Starting in 2024, employers can provide a matching contribution based on an employee’s student loan repayments. The employer can rely on an employee certification of student loan payments made during the year.
Traditionally, matching contributions were only available to employees who contributed to their retirement plan. This option allows employees to save for retirement while also prioritizing student loan repayments.
Automatic enrollment and increases
Plans created after December 29, 2022 — with plan years beginning on or after January 1, 2025 — are required to automatically enroll employees at a rate of at least 3%, but no more than 10%. After the first year, the rate will increase by 1% annually up to at least 10%, but no more than 15%. Employees can opt out of one or both provisions. These changes are effective January 1, 2025. There are exemptions for businesses with 10 or fewer employees, those in operation for fewer than three years, and governmental, church, and SIMPLE 401(k) plans.
Long-term part-time (LTPT) employees
For plan years beginning in 2024, an LTPT employee becomes eligible to participate if they have worked three consecutive years with at least 500 hours in each year. In 2025, the waiting period is reduced to two consecutive years.
Enhanced catch-up contributions
Starting in 2025, employees between the ages of 60 and 63 can make additional catch-up contributions, up to 150% of the standard catch-up contribution limit. At age 64, the limit returns to the standard, $7,500 for 2025. Also, beginning in 2026, certain high-paid employee catch-up contributions must be designated as Roth, which comprise after-tax dollars and grow tax-free.
Penalty-free withdrawals
Participants can now access penalty-free withdrawals if terminally ill or affected by a qualified federally declared natural disaster after December 29, 2022. Starting in 2024, distributions will be available for domestic abuse and emergency expenses. Beginning December 30, 2025, employees can withdraw up to $2,500 annually for qualified long-term care insurance premiums.
Required minimum distributions (RMDs)
In 2023, the penalty for failing to take the minimum required distribution was decreased from 50% to 25% of the amount that should have been withdrawn. The RMD age was increased to 73 in 2023. The age will increase to 75 in 2033.
Starting in 2024, surviving spouses can elect to be treated as the decedent for RMD purposes. Using the decedent’s age may result in lower required payments. SECURE 2.0 also eliminates the pre-death RMD requirements for Roth accounts in employer-sponsored plans.
Other relevant changes include the option to designate employer contributions as Roth, the Saver’s Match (replaces Saver’s Credit), and the expansion of the self-correction program.
How CLA can help with employee benefit plans
Effective oversight and maintenance of employee benefit plans are essential. By implementing robust policies and diligently monitoring legislative changes, employers can help protect their employees’ assets and operate a more successful benefit plan.
Our knowledgeable team is available to provide guidance and insights on how evolving legislation may impact your benefit plan.
Contact us
Stay informed of significant changes to retirement savings and see how these updates could benefit and prepare your organization. Complete the form below to connect with CLA.
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