SECUREly in the Bag: What the New Retirement Plan Rules Mean for Your Business
One of the most talked-about provisions of the whopping $1.7 billion omnibus spending bill that President Biden recently signed into law is the SECURE Act 2.0, which we previewed here late last year, a few days prior to its passage. Savant’s director of financial planning, Anne M. Mank, also provides a careful overview of the new law, which builds on the previous SECURE (“Setting Every Community Up for Retirement Enhancement”) Act of 2019; thus its “2.0” moniker.
Containing provisions aimed at helping more employees prepare for retirement and other important financial goals, SECURE 2.0 offers perhaps the most dramatic shift in the retirement planning landscape in decades. For employers and plan sponsors, the act provides a number of opportunities to significantly improve employees’ ability to prepare for retirement, but it will also require some careful evaluation of existing and new plans in order to take full advantage of the new rules.
- Increased tax credit for plan startup costs. This provision seems like an unalloyed benefit for plan sponsors; it raises the tax credit for plan startup costs from 50% to 100% of costs, up to $5,000. For small business owners or nonprofit groups who have been hesitant to launch a 401(k) or 403(b) because of the costs involved, this provision ought to sweeten the pot considerably. This provision took effect January 1, 2023.
- Automatic enrollment. This provision will likely do more to encourage plan participation than any other aspect of SECURE 2.0. Studies have consistently shown that automatic enrollment dramatically increases across-the-board participation by employees. On the other hand, some employers have been hesitant to offer automatic enrollment due to concerns that increased participation will inflate plan costs. But a Vanguard study indicates that automatic enrollment is most likely to increase participation among lower-paid employees; the higher-paid employees are typically already participating, even in voluntary-enrollment plans. The bottom line seems to be that because of the nature of the employees most likely to be pulled in by automatic enrollment, increased plan costs are unlikely to be a significant factor. It’s helpful to note that plan sponsors have until January 1, 2025 to implement automatic enrollment procedures. Enrolling employees will be required to contribute at least 3% of their eligible wages, with an automatic escalation of 1% per year until a band between 10–15% is reached.
- Later required minimum distributions (RMDs). Beginning in 2023, SECURE 2.0 changes the age at which owners of retirement accounts (including IRAs, 401(k)s and 403(b)s) must begin taking RMDs from their plans. In 2023, the maximum age changes from 72 to 73, and in 2033, RMDs will not be required until age 75. Significantly for plan sponsors, the new law also eliminates the pre-death distribution requirement for Roth 401(k) plan participants; this provision takes effect on January 1, 2024.
- Lower bar for part-time employee participation. Because many employers are still under the impression that part-time employees may be excluded from plan participation, this provision will probably require the most careful preparation in order to maintain the plan’s qualified status. The 2019 SECURE Act reduced the eligibility requirement for enrollment of part-time employees (who work at least 500 hours per year) to three years. Now, SECURE 2.0 has gone one better, lowering the requirement to only two years of part-time employment before becoming eligible. Because many plans will need to be revised—again—to incorporate this requirement, this provision of the law does not take effect until January 1, 2025. Employers who aren’t already doing so will, of course, need to begin tracking part-time employees’ hours, since they will need to be automatically enrolled when they have met the longevity requirement.
- Higher catch-up provision. Persons aged 60 to 63 will be able to make larger catch-up contributions to their plans, starting in 2025; the allowed amount increases to $10,000 per year or 150% of the regular catch-up amount, whichever is greater. Catch-up contributions for employees who earned $145,000 or more in the previous year will be required to receive Roth (after-tax) treatment. The new law also indexes IRA catch-up contributions for persons 50 and older to inflation, rather than the previous flat $1,000 amount.
- Contributions matched to student loan payments. Under SECURE 2.0, employers will have the ability to offer matching contributions to employees who are making qualified student loan payments. Starting in 2024, this provision is aimed at addressing the savings gap for younger holders of bachelor’s degrees.
- Emergency savings accounts. Employers will also be able to offer non-highly compensated employees an emergency savings account into which contributions can be directed, up to a maximum of $2,500. After that level is reached, contributions would be directed into the employee’s retirement account.
- Transfers from 529 to Roth accounts. Beginning in 2024, certain individuals will be able to move money from a 529 education account into a Roth IRA, subject to certain provisions. First, the 529 plan must have been in force for at least 15 years. Also, the Roth account must be in the same name as the beneficiary of the 529 plan. Such transfers cannot exceed $35,000.
These are just a few of the provisions of SECURE 2.0 that are likely to be of most interest to plan sponsors and employers. Most existing plans will require some level of scrutiny in order to make sure they are ready for the “brave new world” being ushered in by the new rules. At Savant, we work hard to ensure we stay on top of changes that affect your retirement plan. If we can help in any way, please contact us.
- Paul Mulholland, “It’s Official: SECURE 2.0 Is the Law,” PlanSponsor.com, December 30, 2022,
- T. Rowe Price, “Automatic Enrollment’s Long-Term Effect on Retirement Savings,” TRowePrice.com, July 7, 2022,
- Vanguard Institutional Investsors, “Hesitant about Autoenrollment?” Institutional.Vanguard.com, March 8, 2022,
- Paychex, “SECURE 2.0 Offers Incentives…” Paychex.com, December 30, 2022,
- Human Interest, “SECURE Act 2.0: Changes to Retirement Planning,” December 29, 2022,
- Rutledge, Sanzenbacher, and Vitagliano, “How Does Student Debt Affect Early-Career Retirement Saving?” Center for Retirement Research, Boston College, May 2018,
- Internal Revenue Service, “Definitions,” IRS.gov,