SECURE Act 2.0 – Overview and Highlights

As part of the Consolidated Appropriations Act of 2023, SECURE Act 2.0 was signed into law on December 29, 2022 and is one of the most comprehensive pieces of retirement plan legislation ever enacted.  At nearly 400 pages in length, the bill contains 92 provisions aimed primarily at expanding employee access to employer-sponsored retirement plans, increasing employee and employer retirement contribution rates, and promoting the nation’s overall retirement security.  The Senate Finance Committee’s description of SECURE Act 2.0 is found here.

Following are some of the most relevant provisions for employers that maintain an employee retirement savings plan or are considering doing so:

Catch-Up Contributions

Starting in 2024, any owner or employee who had gross wages/earned income in excess of $145,000 (indexed) in the prior year must designate any age-50 catch-up salary deferral contributions as Roth rather than pre-tax.

Starting in 2025, the catch-up salary deferral contribution limit will be increased to $10,000 for any participant who was age 60, 61, 62, or 63 for the entire year (i.e., someone who started the year age 59 or finished the year age 64 would not be eligible for the higher catch-up limit for that year).

Required Minimum Distribution (RMD) Beginning Age

Starting in 2023, the RMD beginning age is increased to 73.

Starting in 2033, the RMD beginning age will be increased to 75.

Financial Incentives to Increase Employee Participation

Starting in 2023, employers may offer “de minimis financial incentives such as low-dollar gift cards” to employees who enroll in the plan.  The maximum amount of the incentive/gift card has not yet been determined, but is expected to be in the near future.  Financial incentives/gift cards may not be paid for from plan assets (including the plan’s forfeiture/suspense account).

Roth Treatment of Employer Contributions

Technically effective starting in 2023, employers may allow employees to have employer contributions designated as Roth.  For practical purposes, however, this provision will be difficult for employers and service providers to implement, so further guidance is expected.

Mandatory Cash-Out Distribution Limit

Starting in 2024, employers can force the balance of a former employee out of the plan into an IRA if the former employee’s balance is below $7,000.  Prior to 2024, the limit was set at $5,000.

Paper Statement Requirement

Starting in 2026, defined contribution plans must provide participants with at least one paper statement per year and defined benefit plans must provide participants with a paper statement at least once every three years.

Emergency Savings Withdrawals

Starting in 2024, the 10% early withdrawal penalty is waived for unforeseeable personal or family emergency expenses.

“Sidecar” Emergency Savings Accounts

Starting in 2024, employers may choose to automatically enroll non-highly compensated employees (NHCEs) in emergency savings accounts at a contribution rate of up to 3% of gross wages (but capped at $2,500 per year).  Contributions to the accounts are made on a Roth basis and may be matched by the employer.  Up to four distributions can be taken by an employee from their “sidecar” account per year, and distributions are subject to neither processing fees nor income taxation.

Employer Match on Student Loan Payments

Starting in 2024, employers will be able to match their employees’ “qualified student loan payments” instead of only matching their salary deferral contributions to the retirement plan.

Startup Plan Tax Credit – Plan Expenses

Starting in 2023, for employers with 50 or fewer employees the Startup Plan Tax Credit amount has been increased from 50% of the startup and ongoing service fees that are paid by the employer to 100% of the startup and ongoing service fees that are paid by the employer for each of the plan’s first three years (but capped at $250 times the number of eligible non-highly compensated employees).  Service fees that are deducted from employee accounts are not considered when calculating the tax credit amount.  An employer is only eligible for the tax credit for the first three years during which it maintains any type of retirement plan.  For example, if an employer sponsors a SIMPLE IRA plan for two years and then replaces it with a 401(k) plan, the three-year eligibility period would not start over in the year the 401(k) plan is adopted.

For most employers with 50 or fewer employees, this provision is significant because:

  1. The Startup Plan Tax Credit will cover 100% of the plan’s service fees for each of the plan’s first three years, so there will be no cost to the employer for each of those first three years,
  2. It will incentivize employers to pay service fees that they otherwise might have chosen to have deducted from employee accounts when the tax credit was previously capped at 50%,
  3. It will incentivize employers to select optional add-on services (e.g., 3(16) fiduciary services and payroll integration services) to reduce their fiduciary responsibility and ease their administrative burden, and
  4. Employers inclined to select the lowest-cost provider might now consider other providers because the tax credit will cover 100% of their plan expenses for each of the plan’s first three years regardless

For employers with 51 to 100 employees, the maximum tax credit amount remains 50% of the startup and ongoing service fees that are paid by the employer for each of the plan’s first three years.

For all employers with 100 or fewer employees, the additional tax credit amount of $500 for startup plans with an automatic enrollment provision still applies.

Startup Plan Tax Credit – Employer Contributions

Starting in 2023, employers with 50 or fewer employees will get a tax credit based on employer contributions (nonelective and/or match) that are made to employees during a new plan’s first five years.  This tax credit is separate from – and in addition to – the Startup Plan Tax Credit on plan expenses (described above).  The tax credit on employer contributions will apply as follows:

  • The amount will be based on the employer contributions that were made to employees with gross wages below $100,000 during the year,
  • The tax credit amount will be calculated as follows:
    • Year 1 (i.e., the year the plan is effective) – 100% of the employer contribution amount (capped at $1,000 per employee)
    • Year 2 – 100% of the employer contribution amount (capped at $1,000 per employee)
    • Year 3 – 75% of the employer contribution amount (capped at $1,000 per employee)
    • Year 4 – 50% of the employer contribution amount (capped at $1,000 per employee)
    • Year 5 – 25% of the employer contribution amount (capped at $1,000 per employee)

Employers with 51 to 100 employees are also eligible for the employer contribution tax credit, although at a reduced rate based on a separate (and more complex) formula.

Mandatory Automatic Enrollment in Startup 401(k) Plans

Employers who establish a new 401(k) plan in 2025 or later will be required to automatically enroll employees at a rate of between 3% and 10%, and with “automatic escalation” causing the rate to increase until leveling off at something between 10% to 15%.  Employers with ten or fewer employees are exempt from this requirement.  401(k) plans established prior to 2025 will be grandfathered and will not be required to automatically enroll employees.

“Starter” 401(k) and 403(b) Plans

Starting in 2024, employers that do not already offer a retirement plan can offer a “Starter” 401(k) or 403(b) plan whereby 1) employees must be automatically enrolled at a default salary deferral contribution rate of between 3% and 15% (but can choose to opt out), 2) the annual salary deferral contribution limit is the same as IRA contribution limits, and 3) employer contributions are neither required nor permitted.  These basic “Starter” plans can be adopted at an employer’s discretion, and are very similar to programs that have been mandated by several states for employers that don’t already offer a retirement savings plan.


Starting in 2023, employers sponsoring a SIMPLE IRA can allow employees to make contributions on a Roth basis.

Starting in 2024, SIMPLE IRA plan sponsors may make an additional employer contribution of up to 10% of employee wages (capped at $5,000).

Also starting in 2024, a SIMPLE IRA plan sponsor can change to a safe harbor 401(k) plan mid-year (whereas currently, the change can only take place as of the next January 1st).

Timing of the Amendment to Include SECURE Act 2.0 Changes

Plan amendments to include provisions under SECURE Act 2.0 must be adopted by the last day of the plan year that begins in 2025 (i.e., 12/31/25 for calendar year plans, or the first year-end date after 12/31/25 for non-calendar year plans).  The deadline to adopt amendments to include provisions under SECURE Act 1.0 and the CARES Act have been extended to the same 2025 deadline as for SECURE Act 2.0 amendments.  In the meantime, plans must be operated in good faith to comply with the provisions of the new laws.

About Us

Ingham Retirement Group and The Retirement Plan Company(TRPC) are affiliated companies working together to help people achieve financially secure retirements. As experts in the retirement and investment management industries, our companies are uniquely qualified to not only help plan sponsors across the country design meaningful benefits for their employees, but administer those employee benefits using competitive technology, service, and account management.