What Employers and Plan Sponsors Need to Know About the SECURE 2.0 Act

The SECURE 2.0 Act of 2022 introduced new provisions and updates to retirement planning, aiming to enhance financial security and flexibility for retirement plan participants.

This legislation built on the original SECURE Act, bringing a range of mandatory and optional changes for 401(k) and other retirement plans. Adopting the SECURE 2.0 Act provisions makes a retirement plan more attractive to employees, potentially improving recruitment and retention, while helping employers engage a broader segment of the workforce in long-term retirement planning.

A breakdown of Key Provisions and how they may impact plan administration:

Mandatory Provisions

Optional Provisions

Automatic Enrollment and Escalation (effective 2025)

The SECURE Act 2.0 introduces an automatic enrollment requirement for new 401(k) plans adopted after December 29, 2022. This requirement must be in place starting with plan years beginning after December 31, 2024.

Here are the key details:

Initial Contribution Rate: New employees must be automatically enrolled in the retirement plan at a contribution rate of at least 3% of their salary.
Automatic Escalation: The contribution rate must increase by 1% each year until it reaches at least 10%, but it cannot exceed 15%. For instance, if an employee starts with a 3% contribution, it will increase to 4% in the second year, 5% in the third year, and so on, until it reaches the target rate within the 10-15% range.
Employee Opt-Out: Employees have the option to opt out of the automatic enrollment or choose a different contribution rate. This flexibility allows employees to manage their retirement savings according to their personal financial situations.
Exemptions: Certain plans and employers are exempt from this requirement. These exemptions include small businesses with 10 or fewer employees, new businesses less than three years old, church plans, and governmental plans.

Mandatory Roth Catch-Up Contributions for High Earners (effective 2026)

Beginning 2026, catch-up contributions for employees earning over $150,000 annually must be made on a Roth (post-tax) basis. This change offers high-earning employees more flexibility in tax planning, but it may require employers to update their payroll systems and potentially their plan documents to include a Roth option if one is not already available.

Increased Catch-Up Contributions for Ages 60-63 (effective 2025)

In 2024, participants 50 years of age or older as of the end of the year are eligible to make “catch-up” contributions up to $7,500 above the 2024 annual deferral limit of $23,000, totaling $30,500.

In 2025, participants that attain any age from 50 to 59 as of the end of the year are still eligible to make the standard “catch-up” contribution of up to $7,500 above the (increased) annual deferral limit of $23,500, for a total of $31,000 in 2025.

However, beginning in 2025 and beyond, the SECURE Act 2.0 stipulates that participants who attain any age from 60 to 63 as of the end of the year (and subsequent years) are eligible for a higher catch-up contribution limit, allowing them to save more during the critical years leading up to retirement. In 2025, in other words, the catch-up limit for those aged 60, 61, 62, or 63 by the end of 2025 is $11,250, which when combined with the $23,500 annual deferral limit, totals $34,750.

Consequently, participants 64 years of age or older as of the end of the year (and subsequent years) are only eligible to make the standard “catch-up” contribution for that year (i.e., up to $7,500 in 2025.)

For the most up to date contribution limits, please see our Annual Plan Limits Chart.

Long-Term, Part-Time Worker Eligibility  (effective 2025)

Under the SECURE Act of 2019, part-time employees became eligible for 401(k) plan participation after completing 500 hours of service per year for three consecutive years. SECURE 2.0 streamlines this requirement by reducing the eligibility threshold to two consecutive years of 500 hours, effective in 2025. This provision also extends eligibility to ERISA-covered 403(b) plans, expanding retirement savings access for part-time workers.

Required Minimum Distribution (RMD) Age Increase 

The Act raises the age at which participants must begin taking RMDs to 73 (for individuals who attain age 72 after 12/31/22) and 75 (for individuals who attain age 74 after 12/31/32). This allows participants to keep funds invested for a longer period, which can be beneficial for those not ready to draw down their savings.

Pre-death Roth RMD (effective 2024)

The SECURE 2.0 Act eliminates the pre-death required minimum distribution (RMD) requirement for Roth accounts within employer-sponsored plans, effective January 1, 2024. This change aligns the treatment of Roth accounts in employer-sponsored plans with Roth IRAs, allowing participants to keep their savings invested longer and avoid withdrawals during their lifetime.

Plan Participant Statements (effective 2026)

Starting in 2026, defined contribution plans such as 401(k)s must provide at least one paper statement annually, unless a participant opts for electronic delivery. Participants receiving paper statements electronically can still request paper copies at any time. Employers should review their statement delivery processes and ensure systems are updated to comply with these changes by the effective date.

The SECURE 2.0 Act brings meaningful changes to the retirement landscape, enhancing savings options for employees while introducing new compliance requirements for employers. By understanding and implementing these provisions, employers can provide stronger retirement benefits, promote financial security, and remain compliant with evolving regulations.

Our team is available to support you in navigating SECURE 2.0 and maximizing the benefits for your workforce. For more information, contact RPG Consultants today to discuss how SECURE 2.0 can work for your organization. We’ll work with you to ensure your retirement plan aligns with the latest requirements and best serves your employees’ financial futures.

Matching Contributions on Student Loan Payments 

Starting in 2024, employers can offer matching contributions to employees’ retirement plans based on their student loan repayments. This means that even if an employee is prioritizing student loan payments over contributing to their retirement plan, the employer can still match those payments as if they were retirement contributions. This optional provision makes it possible for younger employees with student debt to build retirement savings.

Distributions for Emergency Expenses 

Starting in 2024, SECURE 2.0 allows participants to make one penalty-free withdrawal of up to $1,000 for emergency expenses. Withdrawn amounts may optionally be repaid within three years, making it easier for employees to handle unexpected expenses while staying on track for retirement. A second emergency expense withdrawal is not permitted during the 3-year repayment period unless the first withdrawal has been paid back. Only one withdrawal of this type is allowed each calendar year, even if repaid.

Emergency Savings Accounts for Employees 

Employers may allow for emergency savings accounts within defined contribution plans. Non-Highly Compensated Employee participants can save up to $2,500 in a Roth-designated emergency fund, providing financial flexibility while keeping retirement funds intact. These accounts provide employees with immediate financial assistance options while keeping their retirement savings intact.

Disaster Relief Distributions and Loans 

For employees impacted by federally declared natural disasters, SECURE 2.0 offers optional relief:

Loans: Increases the maximum loan limit to the lesser of $100,000 or 100% of the vested account balance.
Distributions: Allows for penalty-free, in-service distributions up to $22,000, which may be repaid to the plan over a 3-year period as rollover contributions.

These options aim to support employees facing significant personal and financial hardship as a result of a federally declared disaster.

Self-Certification for Hardship Withdrawals

Effective for plan years beginning after December 29, 2022, employees can self-certify that they meet the requirements for a hardship distribution, eliminating the need for employers to collect and review documentation. Additionally, SECURE 2.0 broadens the definition of hardship to include personal or family emergencies, making it easier for participants to qualify for distributions during difficult times.

Employer Roth Contributions

The SECURE 2.0 Act introduces the option for employers to make matching or nonelective contributions on a Roth basis within retirement plans, effective immediately upon enactment. This allows participants to receive employer contributions as taxable income, which will grow tax-free in their Roth accounts, providing tax-advantaged benefits upon distribution. To implement this feature, the plan must permit Roth contributions, participants must elect to receive employer contributions as Roth, and the plan’s administrator and recordkeeper must have procedures in place for tracking and reporting these contributions.

Involuntary Cash-Out Limit Increase

Under the new law, effective for plan years beginning in 2024, the cash-out limit will be raised to $7,000. Previously, retirement plans could automatically cash out participants’ balances if they left the company with a balance under $5,000.

Penalty-Free Withdrawals for Participants Facing Domestic Abuse or Terminal Illness

Domestic Abuse: Starting in 2024, SECURE 2.0 allows individuals who are victims of domestic abuse to withdraw up to $10,000 (or the account balance, if lower) from their 401(k), 403(b), or other defined contribution plans without incurring the typical 10% early withdrawal penalty. These withdrawals are available once per year and are intended to help individuals escape abusive situations and cover emergency expenses.

Terminal Illness: SECURE 2.0 also allows penalty-free withdrawals for participants diagnosed with a terminal illness. If a participant is diagnosed with a terminal illness, they may access their retirement savings without facing the early withdrawal penalty, regardless of their age. The participant’s doctor must certify that the employee has a terminal illness that is reasonably expected to result in death within 7 years.

Considerations for Employers and Plan Sponsors

RPG Consultants is fully prepared to assist plan sponsors with any questions regarding the provisions of SECURE 2.0. Our team is equipped to help you navigate the complexities of the legislation, ensuring compliance while optimizing the benefits for your retirement plan. Whether you need guidance on required plan amendments, enhanced contribution options, or new administrative requirements, we are here to provide clear, actionable advice tailored to your plan’s needs.

Let us help you successfully adapt to these changes and make the most of the opportunities SECURE 2.0 offers.

Contact RPG Consultants

What Employers and Plan Sponsors Need to Know About the SECURE 2.0 Act

A breakdown of Key Provisions and how they may impact plan administration:

Mandatory Provisions

Optional Provisions

Automatic Enrollment and Escalation (effective 2025)

Mandatory Roth Catch-Up Contributions for High Earners (effective 2026)

Increased Catch-Up Contributions for Ages 60-63 (effective 2025)

Long-Term, Part-Time Worker Eligibility (effective 2025)

Required Minimum Distribution (RMD) Age Increase

Pre-death Roth RMD (effective 2024)

Plan Participant Statements (effective 2026)

Matching Contributions on Student Loan Payments

Distributions for Emergency Expenses

Emergency Savings Accounts for Employees

Disaster Relief Distributions and Loans

Self-Certification for Hardship Withdrawals

Employer Roth Contributions

Involuntary Cash-Out Limit Increase

Penalty-Free Withdrawals for Participants Facing Domestic Abuse or Terminal Illness

Considerations for Employers and Plan Sponsors

Increased Catch-Up Contributions for Ages 60-63 (effective 2025)

Long-Term, Part-Time Worker Eligibility  (effective 2025)

Required Minimum Distribution (RMD) Age Increase 

Matching Contributions on Student Loan Payments 

Distributions for Emergency Expenses 

Emergency Savings Accounts for Employees 

Disaster Relief Distributions and Loans 