The SECURE Act 2.0, which was signed into law in late December 2022, was designed to expand and enhance retirement savings and simplify retirement plan administration rules. The Act contains over 90 provisions that build upon the reforms made in the SECURE Act of 2019. Given the volume of changes, the provisions are scheduled to go into effect over a several year period through 2026. For 2025, there are several changes including mandatory auto-enrollment, increased catch-up contribution amounts, and new eligibility for long term part-time employees. To help clients, prospects, and others, Dermody, Burke & Brown, CPAs, has provided a summary of the key provisions below. 

• Mandatory Auto-Enrollment (Section 101) – This new feature is designed to help increase participation with those who might otherwise not participate in the plan. Starting this year,  most new 401(K) or 403(b) plans must automatically enroll employees when eligible. The enrollment should include a preset contribution rate (varying between 3% and 10%) and offer an opt-out feature. There is also a requirement to have automatic escalation of at least 1% annually until reaching a minimum of 10% (and no more than 15%). It is important to note employers are required to distribute information about the feature; including information on contribution rates, available investment options, and about the opt-out process. This is a mandatory requirement. 

• Increased Catch Up Contributions (Section 109) – Under current regulations, participants 50 years and older can make catch up contributions that exceed the standard limits. Starting in 2025, the catch-up contribution limit is increased to the greater of $10,000 or 50% more than the regular catch-up amounts for individuals who are aged 60-63.  These higher limits are indexed for inflation after 2025. This is an optional change that plan sponsors should consider implementing.  For 2025 the Increased catch up for 401(k) Plans is $11,250 and for Simple Plans it is $5,250.

• Paper Statement Requirement (Section 338) – Starting in 2025, a defined contribution plan is required to provide a paper statement with relevant account information at least once annually. The three other quarterly statements are exempt from this rule. For defined benefit plans, the paper statement requirement is set at once every three years. It is important to note that a plan participant may elect to opt out and agree to receive electronic statements. This is a mandatory requirement.

• Long Term Part-Time Employees – Starting in 2025, defined as those who are at least age 21 and have worked between 500 and 999 hours in two consecutive years—must be allowed to make salary deferral contributions to 401(k) plans. This is a change from the previous three-year requirement under the original SECURE Act.

• Retirement Savings Lost & Found (Section 303) – Many individuals have saved money in a retirement plan account but cannot access it because the employer may have moved, merged, or changed names. There are also companies that are ready to pay benefits but can’t find participants. To remedy this issue, SECURE Act 2.0 calls for the creation of a national lost and found database for retirement plans. Maintained by the Department of Labor (DOL), this database will enable savers that have lost track of retirement accounts to find the contact information of the plan administrator. Starting in 2025, this database is available to individuals who register with the DOL. 

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The SECURE Act 2.0 calls for several additional plan changes to be made for 2025 and beyond. Since not all are mandatory it’s important to be aware of how your plan will be impacted. If you have questions about the information outlined above or need assistance with your next plan audit, Dermody, Burke & Brown, CPAs can help. For additional information call 315-471-9171 or click here to contact us. We look forward to speaking with you soon.