Category: Compliance

Navigating SECURE 2.0: Essential provisions you need to know for 2025

The SECURE 2.0 Act introduces several provisions that will impact payroll configurations, particularly those that will take effect on Jan. 1, 2025. Here are the key provisions that clients need to be aware of:

1.  Automatic enrollment requirement

  • Provision: Clients must automatically enroll eligible employees in new 401(k) and 403(b) plans established after Dec. 29, 2022.
  • Impact on payroll: The payroll system will need to be configured to automatically deduct contributions from employees’ paychecks unless they opt out. Clients must also select an initial contribution rate between 3% and 10% of the employee’s salary.

2.  Automatic escalation of contributions

  • Provision: Plans must include an automatic escalation feature that increases employee contribution rates by 1% annually until reaching a maximum of 10% to 15%.
  • Impact on payroll: Clients will need to ensure the payroll system can accommodate these increases and ensure that employees are notified about their contribution rates and any changes.

3.  Expanded eligibility for part-time workers

  • Provision: The eligibility requirement for long-term part-time workers (LTPT) is reduced from three years to two years. This allows employees who work at least 500 hours in two consecutive years to participate in retirement plans.
  • Impact on payroll: Clients will need to ensure their payroll systems are updated to track hours worked by part-time employees and determine eligibility for plan participation.

4.  Roth contributions for employer matches

  • Provision: Clients may allow employees to elect Roth contributions for client matching and non-elective contributions.
  • Impact on payroll: The payroll system will need to differentiate between pre-tax and Roth contributions, ensuring proper tax treatment and recordkeeping.

These provisions necessitate substantial adjustments to payroll configurations and processes to ensure compliance with the SECURE 2.0 Act by Jan. 1, 2025. It is imperative for clients to begin preparations now by collaborating with their retirement plan administrators to amend plan documents, ensure that the payroll system accurately reflects these changes, update relevant policies and train staff on the new requirements. This proactive approach will facilitate a seamless transition when the changes take effect.

Compliance Corner: Ann Arbor sitting law

In Michigan, the Ann Arbor “Right to Sit” law, recently approved by the City Council, mandates that employers in the city must allow employees to sit during their shifts when it does not interfere with their job duties. This ordinance applies to various businesses, including retail stores, restaurants and service providers. The law aims to improve working conditions and ensure that employees have the option to sit down while performing their tasks.

Effective date

The “Right to Sit” law officially took effect in October 2024. Employees who feel their rights under this ordinance are violated can file complaints with the city’s Human Rights Commission, which will oversee enforcement of the law.

This material is provided for informational purposes only and is subject to change. It is not intended to constitute legal advice. Recipients should consult with counsel before taking any actions based on the information contained within this material. 

Compliance Corner: New York prenatal leave

New York has recently enacted significant updates to its parental leave legislation, particularly through the expansion of the New York Paid Family Leave (PFL) program. Here are the key changes:

  1. Paid prenatal leave
    • Starting Jan. 1, 2025, New York will require clients to provide 20 hours of paid prenatal leave within a 52-week period. This leave is specifically for pregnant employees to attend prenatal medical appointments, including physical exams and other necessary healthcare services related to their pregnancy. This benefit is in addition to existing paid sick leave and family leave entitlements.
  2. Paid Family Leave benefits
    • As of 2024, the PFL program continues to offer up to 12 weeks of job-protected leave for employees to bond with a new child (biological, adopted or fostered), care for a seriously ill family member or handle certain military-related exigencies. Employees will receive 67% of their average weekly earnings, capped at a maximum of $1,151.16 per week in 2024.
  3. Contribution rate changes
    • The contribution rate for employees funding the PFL through payroll deductions will decrease to 0.373% of their gross earnings in 2024, down from 0.455% in 2023. The maximum annual contribution will also decrease to $333.45 from $399.43.
  4. Job protection and health insurance
    • Employees taking PFL are entitled to return to the same or a comparable job upon their return and can maintain their health insurance benefits during their leave.
  5. Changes in covered payroll thresholds
    • The maximum covered payroll threshold for calculating contributions will increase in 2024 to $89,343.80, based on the Statewide Average Weekly Wage (SAWW).

Suggestions for clients

  • Clients need to update their policies and inform HR departments about these changes to ensure compliance with the new regulations.
  • The introduction of paid prenatal leave marks New York as the first state in the U.S. to mandate such a benefit, reflecting a broader trend toward supporting pregnant workers.

These updates are designed to enhance support for employees during critical life events while ensuring that clients are aware of their responsibilities under the law.

For more information, visit New York State Paid Family Leave (ny.gov).

Compliance Corner: Nebraska’s new frontier: Medical marijuana legalization and its path forward

On Nov. 5, 2024, Nebraska voters approved two ballot measures legalizing medical marijuana. The Nebraska Medical Cannabis Patient Protection Act permits qualified patients to use and possess up to five ounces of cannabis with a healthcare practitioner’s recommendation. It also creates the Nebraska Medical Cannabis Commission to regulate the industry. Despite strong voter support, the initiative faces legal challenges over ballot signature validity.

For more information, click here.

This material is provided for informational purposes only and is subject to change. It is not intended to constitute legal advice. Recipients should consult with counsel before taking any actions based on the information contained within this material. 

Compliance corner: Paid leave law changes across states

Several states have passed changes to their leave laws that will take effect in early 2025. Employers should review the details of these statutory changes and update internal policies accordingly. The following are some of the many changes that will go into effect in the first few months of next year: 

Washington sick leave expansion 

  • The Washington Legislature passed a bill to expand the state’s sick leave law in the following ways: 
    • It will expand the permissible scenarios for taking leave to include closure of a child’s day care or school for reason of a public emergency.  
    • The definition of “family member” now includes any person who regularly resides in an employee’s home with a relationship that creates an expectation of care. This expansion brings the sick leave law’s definition of family member in line with that of the state’s paid family and medical leave law.  
    • The definition of “child” now includes a child’s spouse.  
    • Similar changes will impact statutes covering transportation network companies like Uber and Lyft.  
  • These provisions will be effective Jan. 1, 2025. For more information about the new law and its effects, visit the following:

Connecticut paid sick leave law expansion 

  • Beginning Jan. 1, 2025, this expansion will lower the threshold headcount for employers subject to the law from 50 to 25 or more employees. The law will also expand to include all employees (excluding some limited exceptions) and not just the previous group known as “service workers.”  
  • The paid leave accrual rate will also accelerate from one hour of leave per 40 hours worked to one hour of leave per 30 hours worked.  
  • Justification for taking leave will also expand under the new law, and the definition of “family member” will expand as well.  
  • The new law will also require employers to provide notices to individual employees either at their time of hire or Jan. 1, 2025, whichever is later, and employers must put accrual balances on paystubs.  
  • There are numerous other changes to the law that are not mentioned here, and employers with any employees in Connecticut must familiarize themselves with all changes to ensure compliance before the new year.  
  • For more information about the new law and its effects, visit the following: 

Michigan paid sick leave  

  • After a court ruling in 2024, the state’s Earned Sick Time Act will replace the Paid Medical Leave Act, effective Feb. 21, 2025.
  • There is an employee headcount threshold of 10 employees or more in 20 workweeks, but that threshold only applies to a few of the law’s provisions; the vast majority apply to all employers with at least one employee in the state.
    • One difference is the leave usage capped per year – small employers may cap paid leave usage at 40 hours per year with 32 hours unpaid. All other employers must allow up to 72 hours of paid leave annually.  
  • The accrual rate for ESTA is one hour for every 30 worked, and there is no accrual cap. All accrued leave must carry over year to year.  
  • There are a host of notice and documentation requirements, including the requirement to post the state’s paid sick leave poster and provide notice of rights to all employees.  
  • This represents a comprehensive change to the paid leave landscape in Michigan, and employers should implement any changes required to comply with the law’s provisions now.  
  • For more information about the new law and its effects, visit the following: 

New York prenatal leave  

  • Earlier this year, New York enacted a law requiring employers to provide up to 20 hours of paid prenatal leave per year. Employees can use leave hours for health care services related to their pregnancy.  
  • The prenatal leave is entirely separate from any other mandatory paid leave and cannot count against an employee’s other accrued leave.  
  • The law is effective Jan. 1, 2025. 

Delaware and Maine to require leave payroll deductions 

  • Maine’s paid family and medical leave program will require employers to start payroll withholdings and quarterly wage reports.  
  • The withholding amount for employers with 15 or more employees is 1% of wages, half of which may be deducted from employees. The amount for employers with fewer than 15 employees is 0.5% of wages, and the entire amount may be deducted from employees.  
  • Delaware’s paid family and medical leave insurance program will require employers with 10 or more employees to begin payroll deductions in the following amounts: 0.32% for parental leave, 0.40% for medical leave and 0.08% for family caregiver/qualified exigency leave; employers with 10-24 employees are only required to deduct the parental leave portion. Employers may require employees to pay up to 50% of the total deduction.  
  • Both deduction requirements will begin Jan. 1, 2025.  
  • For more information about the new law and its effects, visit the following: 

This material is provided for informational purposes only and is subject to change. It is not intended to constitute legal advice. Recipients should consult with counsel before taking any actions based on the information contained within this material. 

Compliance corner: California compliance updates

California Gov. Gavin Newsom signed a slew of employment legislation into law last month, and businesses in the state should begin preparing compliance efforts now. All effective Jan. 1, 2025, these changes touch subjects from paid sick leave to hiring practices. It is imperative that California employers review these new statutes closely and start implementing requisite changes now.  

  • Driver’s licenses for job applicants 
    • Employers in California are no longer permitted to require job applicants to have a driver’s license unless the job function cannot be performed without one.  
    • The law is intended to help nondrivers who rely on public transportation, biking or walking maintain eligibility for work in the same jobs as those who operate a motor vehicle.  
    • This law will take effect Jan. 1, 2025.  
  • Mandatory use of vacation  
    • Employers in California are no longer permitted to require employees use up to two weeks of company vacation time before they start receiving paid family leave insurance benefits.  
  • Expanded uses for paid sick leave 
    • Two bills signed into law last month make significant changes to the state’s Healthy Workplaces Healthy Families Act, the California paid sick leave law.  
    • The first bill does the following, among other things: 
      • Permits employees to take sick/safe leave not only when an employee is the victim of a crime but also when their family member is a victim.  
      • Expands the range of crimes that justify an employee taking safe leave for this purpose.  
      • Expands the reasons why an employee is eligible to take sick/safe leave, including but not limited to: obtaining a restraining order, assisting a family member in obtaining a restraining order, seeking services from a domestic violence shelter, etc.  
    • The second bill makes clear that agricultural employees may use paid sick leave time to avoid outdoor work subjecting them to smoke, heat or flooding conditions related to a state emergency.  
  • Banning captive audience meetings
    • Another law Gov. Newsom signed in September bans employers from holding mandatory meetings that discuss religious or political matters; companies often use such meetings to counter union organizing.  
    • The ban allows employees to seek both injunctive relief and a private right of action that would carry a penalty of $500 per employee.  
    • The bill will be effective Jan. 1, 2025.  

This material is provided for informational purposes only and is subject to change. It is not intended to constitute legal advice. Recipients should consult with counsel before taking any actions based on the information contained within this material. 

WXO-E0924-7869_Secure 2_0

SECURE 2.0 information sheet now available

The SECURE 2.0 Act of 2022 builds upon the original SECURE Act of 2019 to further enhance America’s retirement system. This legislation introduces numerous provisions aimed at simplifying retirement savings and making it more accessible for Americans. Key changes include expanded automatic enrollment, increased catch-up contributions and new options for student loan payment matching. Additionally, the Act provides new opportunities for part-time employees and introduces starter plans to encourage broader participation.

Read the SECURE 2.0 information sheet in the Insperity Help Center for more information on the significant provisions of SECURE 2.0 and their implications for payroll and retirement planning. 

Secure 2.0 Act for 2025

SECURE 2.0 Act impact for 2025

Enacted in December 2022, the SECURE 2.0 Act continues to impact retirement plan design and how employees save for retirement. For 2025, the following required provisions will be effective:

Automatic enrollment and escalation

401(k) and 403(b) plans established after Dec. 28, 2022 are generally required to implement an automatic enrollment and escalation feature. Impacted plans must automatically enroll participants at a percentage between 3% to 10% and automatically increase deferrals by 1% each year (up to 15% as specified by the plan).

For impacted clients with a 401(k) plan record-kept by Insperity, Insperity Retirement Services will reach out in August to begin the process of changing these provisions to include both automatic features for the coming year.

WHY IT MATTERS: Automatic enrollment has been shown to significantly increase participation, while automatic escalation will help participants save more for retirement.

Long-term, part-time employee eligibility

For 2025, the service period before long-term, part-time (LTPT) employees are able to contribute to their accounts decreases from three to two 12-month periods. For 2024, Insperity already assisted impacted clients to implement the new LTPT eligibility requirements, and we anticipate this change from three to two 12-month periods will have little to no impact.

IMPORTANT DIFFERENCES: It is a common misconception that employees not eligible for health and welfare benefits are also not eligible for 401(k) plan benefits. It is important to understand that employee eligibility requirements differ from one type of benefit to another.

Higher catch-up limits

Participants ages 60-63 will have a higher catch-up contribution limit than the standard catch-up limit.

Insperity is updating its systems so that eligible participants will have the ability to contribute up to the higher limit.

WHY IT MATTERS: Higher catch-up limits allow those participants who are nearing retirement age an opportunity to make even higher contributions and save more for retirement.