The Biggest SECURE 2.0 Act Takeaways Impacting Employers

SECURE Act 2.0 is currently and will continue to significantly impact regulations related to employer-sponsored retirement plans.

While most provisions of SECURE 2.0 will not take effect immediately, the legislation promises to alter the retirement landscape for millions of Americans and the businesses that employ them. The SECURE 2.0 Act of 2022("SECURE 2.0"), as included in Division T of the Consolidated Appropriations Act, 2023, is centered around helping U.S. workers save for retirement. SECURE 2.0 looks to expand the number of Americans with access to retirement savings vehicles while also helping to increase the amount that they are able to save. Many of the provisions address reasons why people are not saving and provide new mechanisms and incentives to boost both employer and employee contributions.

Here are some of the provisions that could have the greatest impact on retirement plans moving forward:

Required Auto Enrollment

Automatic enrollment is increasingly becoming the standard for many retirement plans. But now, SECURE 2.0 is taking it from an option within the plan design to a required one. The provision states that all 401(k) and deferral 403(b) established since the signing of Secure 2.0 on 12/29/2022 are required to adopt automatic enrollment with the 2025 plan year.

This will require plans to:

• Automatically enroll participants at a minimum of 3%
• Will have required annual increases - of 1% to a maximum of 10% to a minimum of 10 or a maximum of 15%
• QDIA will be selected unless the participant makes a different selection
• The plan must allow for permissible withdrawals. Withdrawals must be made within 90 days after the first auto deferral.

This auto-enrollment must apply to all new employees and any current employees without a deferral election on file.

There are a few exceptions to the requirements of this automatic enrollment feature, including:

• Governmental Plans & Church Plans
• Simple 401K Plans
• Companies with fewer than 11 employees
• New business under 3 years old

There are also some factors for what is considered a “new plan.” regarding mergers, MEPs and PEPs. It is important that if you are going through one of these processes, you review carefully.

Roth Contributions

Secure 2.0 also greatly expanded the Roth options inside of retirement plans. These options include:

Roth Employer Contributions: This allows participants to elect employer contributions as Roth. It is currently allowable but limited. Many recordkeepers are not currently set up to accommodate this provision, and the same end result can be provided through other current in-plan options.

Required Roth Catch-Up: This was set to take place in 2024 but has been pushed back until 2026. This will require all catch-up contributions for anyone who makes $145,000 in 2025 to have their catch-up allocations designated as Roth.

Since 2024, some additional guidance has stated that if a plan does not offer Roth, employees who make over $145,000 would not be able to make catch-up contributions. Additionally, a plan could not require all catch-up contributions to be Roth. Anyone who makes under $145,000 must still be allowed the option to make these as pre-tax or Roth (if the plan allows).

Long-Time Part-Time Employees

Approximately 17% of the U.S. workforce is comprised of part-time workers, which equates to 25 million employees. This group of employees has been underrepresented and underserved regarding retirement savings options. [1]

The continued inclusion of long-time part-time employees will play a significant role in further expanding the coverage to a population of the workforce that typically goes underserved. Tightening the rules around excluding long-time part-time employees could go a long way in closing the gender equality gap when it comes to retirement savings, as women are more likely to work in part-time jobs that do not provide retirement plans.

The majority of part-time workers are not primarily motivated by compensation and prefer the flexibility of a part-time position. Sixty-three percent of part-time workers are female. Many are choosing these positions because of family or personal reasons.[1]

Starting with the 2025 plan year, SECURE 2.0 will now require employers offering 401(k) or ERISA 403(b) plans to make available the ability to defer into the plan to part-time employees with two consecutive years and at least 500 hours of service each year. There is no requirement to provide them with any employer allocations or include them in most compliance testing.

Since the initial passing of SECURE 2.0, additional guidance has also been provided related to service requirements and “former” long-term part-time.

Emergency Savings

The current economic climate has shown that American workers have a serious lack of savings. According an emergency savings study done by Bankrate, 25% of Americans have zero emergency savings. This lack of savings often forces people to dip into their retirement savings to help pay for unexpected expenses. SECURE 2.0 has greatly expanded the ability to allow participants to use their retirement plan to help meet some immediate and unforeseen financial burdens. While optional, these include but are not limited to:[2]

• Emergency Expense Distributions up to $1,000.
• Distributions for areas under Federal Disaster Relief
• Terminal Illness Distributions
• Qualified Birth and Adoption Distributions
• Domestic Abuse Distributions.

Although emergency savings solutions existed before the passage of SECURE 2.0, offering these types of solutions to employees was problematic due to the inherent challenges of providing liquid, penalty-free savings in a qualified plan structure. The new legislation provides a clear mechanism for offering emergency savings vehicles in conjunction with employer-sponsored retirement plans.

These are some of the most important pieces of the SECURE 2.0 legislation, which stands to impact millions of American workers and the businesses that employ them. Plan sponsors are encouraged to continue monitoring developments and review the full text of the legislation to stay compliant with these new regulations.

SECURE 2.0 will have a lasting impact on how Americans save for retirement and will open opportunities to many that were not previously available. This legislation will hopefully create better retirement outcomes for employees everywhere by offering more flexibility and greater saving opportunities within employer-sponsored plans that so many depend on.

To better understand how SECURE 2.0 may impact your plan and your employees, connect with a OneDigital Retirement Adviser for a customized plan review.

Investment advice offered through OneDigital Investment Advisors LLC.
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[1] Zippia, “20+ Essential Part-Time Job Statistics (2023): Who Works Part-Time And Why?”
[2] Bankrate, “Bankrate’s 2025 Annual Emergency Savings Report”