The SECURE 2.0 Act was enacted on Dec. 29, 2022, and serves as a continuation of the Setting Every Community Up for Retirement Enhancement Act of 2019. Both pieces of legislation aim to address retirement readiness by encouraging retirement plan availability and participation. Some provisions became effective immediately upon signing, while others took effect in 2024, and yet others are effective in 2025 and beyond. Some provisions are mandatory, while others are optional.
Why is SECURE 2.0 important?
SECURE 2.0 is designed to motivate employees to save for retirement and incentivize employers to provide retirement plan benefits.
How is Insperity implementing the required and optional provisions of SECURE 2.0?
Insperity has been reviewing SECURE 2.0 and determining next steps since the legislation was enacted. Some provisions pertain to payroll processes supporting retirement plan operations. Consequently, Insperity is focusing on making necessary modifications to payroll systems to accommodate the new requirements from a payroll perspective.
How will Insperity communicate with clients about SECURE 2.0?
Insperity has been informing clients about relevant SECURE 2.0 provisions that are already in effect. When appropriate action is needed, Insperity will assist clients with implementation.
Where can I find detailed information about SECURE 2.0 provisions?
The SECURE 2.0 Key Provisions Summary reviews some provisions that may impact your business. Click this link to view the Key Provisions Summary: Secure-2.0-External-Key-Provisions.pdf
What are some of the most discussed provisions of SECURE 2.0?
Several provisions have gained attention from employers and legal and financial organizations. Below is an overview of some frequently discussed provisions:
- Enhanced plan startup tax credit for small businesses: In 2023, the startup plan tax credit increased to 100% of startup costs for small businesses with 1-50 employees (remaining at 50% for employers with 51-100 employees). Small businesses with 1-100 employees may also claim a tax credit for employer contributions for five years after startup.
- Automatic enrollment requirement: Any 401(k) or 403(b) plan established after Dec. 29, 2022, must automatically enroll eligible employees and implement automatic annual deferral increases.
- Expanded catch-up contributions: Beginning in 2025, the annual catch-up contribution amount increases for participants ages 60-63.
- Roth catch-up: Starting in 2026, all catch-up contributions for participants earning more than $145,000 in the prior year must be made as Roth contributions.
- Changes to required minimum distributions: The age requirement for participants to start taking required minimum distributions increased from 72 to 73 in 2023 and will increase to age 75 in 2033. Additionally, Roth contributions are no longer subject to RMD requirements during the participant’s lifetime starting in 2024.
- Student loan matching contributions: A provision starting in 2024 allows employers to match qualified student loan payments made by employees as if they were elective deferrals.
- Expedited long-term part-time employee eligibility: Eligibility for long-term part-time employees to make 401(k) deferrals is expedited by shortening the eligibility period from three years to two years for plan years beginning after Dec. 31, 2024.
- Emergency savings accounts: Plans may permit participants to make Roth contributions to an emergency savings account within the plan, up to a $2,500 maximum. Participants must be able to withdraw from the ESA at least once a month, and the 10% penalty for early withdrawal does not apply. These emergency savings provisions went into effect in 2024.
- Deferral-only starter plans: Effective in 2024, an employer without a qualified retirement plan may establish a starter 401(k) or safe harbor 403(b) that permits only employee deferrals to automatically satisfy certain nondiscrimination testing requirements.
If I have questions, how do I get more information about SECURE 2.0?
Your retirement services recordkeeper can assist with questions about the SECURE 2.0 Act’s impact on your plan. If Insperity Retirement Services is your recordkeeper, please contact your plan consultant in Insperity Retirement Services or call our toll-free number at 1.866.715.3552. The retirement services’ call hours are from 7 a.m.-7 p.m. CT, Monday to Friday. You may also send an email to our retirement services team at contact_center@insperity.com.
When will more information be available for SECURE 2.0?
We will share additional information as the effective dates of these changes approach or system enhancements occur.
This information is provided solely for informational purposes and does not constitute legal advice or create an attorney-client relationship. Its content is general in nature and may not address individual circumstances or specific legal issues. Insperity does not interpret clients’ retirement plan documents and does not administer, have discretionary or act as a fiduciary of any client-sponsored retirement plans. For legal advice tailored to your situation, please consult with your legal counsel.