Key Secure 2.0 Provisions for 2025
As 2025 approaches, important updates under SECURE 2.0 will reshape retirement plans, impacting contribution limits, automatic enrollment, part-time worker eligibility, and new withdrawal options. Here’s what employers and participants need to know.
1. Increased Catch-Up Contribution Limit
Participants aged 60 to 63 can contribute the greater of $10,000 or 150% of the age-50 catch-up limit starting in 2025. This change allows older workers to maximize savings in the crucial years leading up to retirement.
Employer Action:
Employers must track age milestones accurately to apply contribution limits correctly and ensure compliance.
2. Mandatory Automatic Enrollment
New 401(k) and 403(b) plans established after December 29, 2022 must automatically enroll employees. Initial deferral rates range from 3% to 10% of pay, increasing annually to 15% unless employees opt out within 90 days.
Exemptions:
- Plans established before December 2022
- Employers with fewer than 10 employees
- Government and church-sponsored plans
3. Expanded Part-Time Worker Eligibility
Starting in 2025, employers must allow part-time employees with at least 500 service hours for two consecutive years to participate in retirement plans. While employer contributions aren’t required, plans must track service hours carefully to ensure compliance.
4. New Distribution Options
The new provisions offer penalty-free withdrawals in specific circumstances, including:
- Terminal Illness: Allowing critically ill participants access to funds early.
- Domestic Abuse Victims: Offering financial relief for those experiencing domestic abuse.
- Federal Disasters: Enabling withdrawals after federally declared disasters, with repayment options in some cases.
Employers can opt in to these features, giving participants greater access to funds when faced with unexpected hardships.
These upcoming changes create opportunities for participants to save more and access funds when needed. Employers must adjust their plans, track participant data carefully, and ensure compliance with the latest regulations.
