Big Retirement Plan Changes Ahead: What SECURE Act 2.0 Means for 2025 and Beyond
The SECURE Act 2.0 of 2022 introduced several mandatory and optional provisions that are now taking effect, with recent IRS guidance clarifying critical aspects. “There are many moving parts stemming from SECURE 2.0. With numerous provisions rolling out in the coming years, it’s crucial for individuals and businesses to stay informed and adapt to the evolving retirement landscape,” said Patty Hutchinson, director of retirement plan services at Savant Wealth Management.
As plan sponsors adapt to the evolving regulatory landscape, a significant shift looms in 2026. Here’s what to know for 2025 and beyond.
Mandatory Auto-Enrollment for New Plans
Starting January 1, 2025, newly established 401(k) and 403(b) plans must automatically enroll employees at a minimum contribution rate of 3% of pay. Contributions will then increase annually by one percentage point until reaching at least 10%, with a cap of 15%.
Recent IRS guidance clarified that the auto-enrollment mandate applies to new plans created since December 29, 2022. However, determining which plans fall under this requirement has proven more complex than initially anticipated. Plan sponsors should review these regulations carefully to ensure compliance.
Expanded Eligibility for Long-Term, Part-Time Employees
The original SECURE Act of 2019 improved retirement plan access for long-term, part-time employees by allowing those who worked at least 500 hours per year for three consecutive years to contribute. SECURE 2.0 reduces the service requirement, making employees eligible to contribute to their employer’s plan for plan years beginning after December 31, 2024.
Additionally, this expanded coverage now includes 403(b) plans that are subject to the Employee Retirement Income Security Act (ERISA). Some employers have opted to extend eligibility to all part-time workers, but in cases where eligibility is based on hours worked, accurate tracking remains essential.
Super Catch-Up Contributions for Ages 60–63
Starting in 2025, participants aged 60 through 63 will be eligible for enhanced catch-up contributions. Instead of the standard $7,500 catch-up contribution available to individuals aged 50 and older, these participants can contribute up to $11,250.
Employers and payroll providers must ensure accurate age tracking of participants, as individuals turning 64 before year-end will not qualify for the increased contribution limit.
Mandatory Roth Catch-Up Contributions for High Earners
A major change taking effect in 2026 will require higher-earning employees to make catch-up contributions to a Roth account rather than a pre-tax account. Specifically, individuals aged 50 or older whose prior-year Social Security wages from the plan-sponsoring employer exceeded $145,000 must adhere to this rule.
The IRS issued guidance in January clarifying key details:
- The $145,000 threshold is based solely on prior-year FICA earnings from the same employer sponsoring the plan.
- Employers do not need to track income from previous employers.
- The requirement does not apply to individuals who are exempt from FICA taxes.
This rule change necessitates quick and accurate data collection at year-end to ensure compliance. Plan sponsors should coordinate with their payroll and benefits providers to implement efficient tracking systems.
Preparing for the Future
With several SECURE 2.0 provisions already in effect and more changes on the horizon, employers must stay proactive in their compliance efforts. Reviewing IRS guidance, collaborating with payroll providers, and updating plan documents will be essential steps in adapting to these new regulations. By staying informed, plan sponsors can work toward a smoother transition and continued support for employees’ retirement savings goals. “At Savant, our Retirement Plan Services team is committed to guiding plan sponsors through the evolving retirement landscape. We provide professional counsel, strategic insights, and resources to help our clients make informed decisions.”
Source: SECURE Act 2.0
Patricia L. Hutchinson
Director of Retirement Plan Services
MBA