Secure Act 2.0
Enhancing Retirement Security and Preparing for 2025
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was a landmark piece of legislation aimed at improving the retirement system in the United States. Its successor, SECURE Act 2.0, builds on that foundation with significant updates to how Americans can save for retirement. Some provisions are already in effect, while others will roll out starting in 2025. These changes introduce both opportunities and responsibilities for plan sponsors, payroll providers, and financial advisors alike.
Overview and Key Objectives
SECURE Act 2.0 focuses on three core objectives: increasing retirement plan participation, expanding savings opportunities, and improving access for underserved groups such as part-time workers and employees burdened by student debt. Financial professionals must understand the implications of these changes—many of which require either opt-in or opt-out decisions from plan sponsors.
Key Provisions Already in Effect
Several major features of SECURE Act 2.0 are already active:
Automatic Enrollment Requirements: For new 401(k) and 403(b) plans adopted after December 29, 2022, automatic enrollment is mandatory. Employees must be enrolled at 3–10% of pay, with annual increases of 1% up to a maximum of 10–15%. SIMPLE plans and small businesses with fewer than 10 employees or under three years in business are exempt. Compliance hinges on robust payroll systems and clear employee communication (Congressional Research Service, 2023).
Student Loan Matching Contributions: Starting in 2024, employers may match employee student loan payments with retirement plan contributions. This optional but innovative provision helps employees with student debt build retirement savings. Administrative guidance from the IRS is expected to clarify implementation in 2025 (Financial Planning Association, 2023).
Notable Changes Coming in 2025
As of 2025, several new provisions will come into effect:
Increased Catch-Up Contributions for Ages 60–63: Individuals turning 60–63 during the year may contribute the greater of $10,000 or 150% of the standard age-50 catch-up limit (adjusted for inflation). This change introduces administrative complexity, as plans must track eligible participants and notify them about applicable limits. Payroll systems must also differentiate between age groups. While it remains unclear if this provision is mandatory, plans should begin preparing now (Smith & Johnson, 2022).
Expansion of Part-Time Worker Eligibility: Part-time employees who work at least 500 hours annually for two consecutive years will be eligible to contribute to 401(k) and 403(b) plans beginning in 2025. Service prior to 2023 doesn’t count for eligibility or vesting. While employer matching is not required, this expands access significantly, especially in industries reliant on part-time labor (Department of Labor, 2024).
Optional Distribution Provisions: Plan sponsors can choose to adopt the following withdrawal provisions:
Terminally Ill Individuals: May withdraw funds without incurring the 10% early distribution penalty. Certification from a physician is required.
Domestic Abuse Victims: May withdraw up to $10,000 or 50% of their vested account balance penalty-free. Re-contributions are permitted under certain conditions.
Federal Disaster Relief: Up to $22,000 may be withdrawn penalty-free per federally declared disaster, with income taxes spread over three years and re-contribution options available.
Roth Catch-Up Contribution Requirement: Originally slated for 2024 but delayed until 2026, high earners (over $145,000) must make catch-up contributions on a Roth basis. This introduces income-based tracking and plan amendments, and more regulatory guidance is forthcoming.
Other Enhancements and Strategic Benefits
Beyond compliance, SECURE Act 2.0 presents substantial strategic value for both employers and financial professionals:
Small Business Incentives: The Act offers tax credits and simplified administration to encourage small businesses to establish retirement plans. These incentives help broaden coverage across underserved worker segments.
Lifetime Income Options: New provisions support the inclusion of annuities and other guaranteed income products in retirement plans, helping retirees avoid outliving their savings (Employee Benefit Research Institute, 2023).
Practical Implications
Financial advisors and plan administrators must be proactive. Many provisions require plan amendments, changes to payroll systems, and new participant notices. While some rules are mandatory, many are optional—requiring thoughtful analysis to align each feature with the employer’s and participants’ needs.
Notably, plan sponsors should:
Coordinate closely with payroll providers to track eligibility and catch-up contributions accurately.
Update plan documents and participant notices to reflect changing rules.
Educate employees about their new options, especially part-time workers and those eligible for specialized distributions.
Now what?
SECURE Act 2.0 represents a modernized, more inclusive vision for retirement savings in America. It enhances access, boosts savings potential, and addresses evolving workforce dynamics. By expanding automatic enrollment, introducing catch-up contributions for mid-career workers, and providing innovative solutions like student loan matching, this legislation empowers advisors and plan sponsors to better serve clients and employees.
These enhancements directly benefit our clients by providing more opportunities to grow and protect their retirement savings. The new provisions allow financial professionals to craft smarter, more tailored retirement strategies—ensuring long-term security for individuals and families. With the right implementation and guidance, SECURE Act 2.0 becomes not just a compliance task, but a powerful planning tool that redefines retirement readiness for the better.
References:
Congressional Research Service. (2023). The SECURE Act 2.0: Overview and Policy Issues. Retrieved from https://www.crs.gov
Department of Labor. (2024). Expanding Access to Retirement Savings for Part-Time Workers: Policy Brief. Retrieved from https://www.dol.gov
Employee Benefit Research Institute. (2023). Longevity and Lifetime Income Options: Implications for Retirement Security. Retrieved from https://www.ebri.org
Financial Planning Association. (2023). Student Loan Payment and Retirement Savings Integration: A New Approach. Retrieved from https://www.planner.org
Smith, R., & Johnson, L. (2022). Catch-Up Contributions and Roth Requirements: A Practical Guide to SECURE 2.0. Journal of Retirement Planning, 29(4), 12–17.
