Secure 2.0

What is the Secure 2.0 Act? 

The SECURE 2.0 Act (Setting Every Community Up for Retirement Enhancement) is a law designed to help more people save for retirement and make the process easier and more flexible. The SECURE 2.0 Act was signed into law on December 29, 2022, as part of a larger spending package. Most of its provisions started taking effect in 2023, with some changes rolling out over the next few years. The SECURE 2.0 Act introduces new responsibilities, benefits, and opportunities to improve workplace retirement plans. Several SECURE 2.0 Act changes are set to take effect in 2025. Here’s what employers should know:

1. Higher Catch-Up Contributions (Ages 60-63)

• • Individuals aged 60 to 63 can make larger “catch-up” contributions to their retirement plans (like 401(k)s and IRAs).
  • The new annual limit will be the greater of $10,000 or 50% more than the regular catch-up amount for those aged 50 and older (adjusted for inflation).

2. Automatic Enrollment in New Retirement Plans

• • Most new 401(k) and 403(b) plans must automatically enroll employees at a contribution rate of at least 3%, increasing annually by 1% until it reaches at least 10% but no more than 15%.
  • Employees can still opt out if they don’t want to participate.

3. Emergency Savings Accounts (Linked to Retirement Plans)

• • Employers can offer emergency savings accounts linked to retirement plans, letting employees save up to $2,500 for emergencies. Contributions will be after-tax, and withdrawals are penalty-free.

4. Saver’s Match Program

• • The Saver’s Credit, which provides a tax credit for low- to middle-income savers, will transition to a federal matching contribution deposited directly into the saver’s retirement account.
  • The match is 50% of contributions, up to $2,000 per individual.

5. Student Loan Matching Contributions

• • Employers will be allowed to treat student loan payments as if they were retirement plan contributions, meaning they can match those payments with contributions to the employee’s retirement account.