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.