SECURE 2.0 ACT KEY CHANGES IMPACTING EMPLOYERS AND ITS EMPLOYEES
By Janice Fortin CPA , MST Shareholder , Employee Benefit Plan Group
EMPLOYER IMPACT
As a follow up to the Setting Every Community Up for Retirement Enhancement ( SECURE ) Act passed in 2019 , Congress passed a SECURE 2.0 Act in December 2022 , aimed to provide even more retirement options for American workers . The latest legislation includes a significant amount of provisions impacting retirement plan providers and its employees .
Below is a summary of key provisions employers and employees should be aware of to prepare ahead .
• Automatic enrollment and plan portability . Beginning in 2025 , new 401 ( k ) and 403 ( b ) plans must automatically enroll eligible participants , starting at a 3 % contribution rate . Businesses or organizations exempt from this provision include small businesses ( 10 or fewer employees ), new businesses ( in operation for less than three years ), and church or governmental plans . Employees may opt out of either plan .
• Changes to long-term , part-time employees . Effective for plan years beginning in 2025 , the eligibility service period for long-term , parttime employees is shortened to two consecutive 12-month periods from its three consecutive 12-month periods . The latest provision extends the long-term , part-time employee provision to 403 ( b ) plans subject to ERISA .
• Student loan payments . Beginning in 2024 , employers may make matching contributions under a 401 ( k ) or 403 ( b ) plan on employees ’ qualified student loan payments to help them save while paying off debt .
• New pension-linked emergency savings accounts ( ESA ). Beginning in 2024 , plan sponsors may add pension-linked ESAs to their defined contribution retirement plans and governmental plans for non-highly compensated employees . These accounts are part of the plan document but accounted for separately . Plan sponsors may automatically opt their employees into these accounts at a rate of no more than 3 % of their compensation , and all contributions must be made on an after-tax basis .
• Recovery of retirement plan overpayments . Effective immediately , retirement plan fiduciaries have the discretion to recoup overpayments mistakenly made to retirees , which was previously required to be recovered under both the Employee Retirement Income Security Act and Internal Revenue Code . Should a plan fiduciary choose to recoup overpayments , recovery efforts are subject to certain limitations and protections to help safeguard retirees .
2 VIEWpoint Issue 1 | 2023