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How SECURE Act 2.0 changes retirement

New legislation takes effect this year. These are our five most anticipated provisions.

Much already has been written about the U.S. Congress’ passage of the SECURE Act 2.0, the highly anticipated follow-up to the 2019 SECURE Act.

For retirement plan sponsors, there’s a lot to like. But out of everything in the Act, we think you will want to pay close attention to the following five specific improvements.  

1. New plans are required to have auto-enrollment and auto-escalation features

Newly eligible employees must be enrolled automatically starting at contribution levels ranging from 3% to 10% of pay.

2. Employers can match student loan repayments

Starting in January 2024, employers can “match” employees’ student loan repayments as if they had contributed to a retirement plan.

3. Roth accounts gain prominence

Employers can now direct their matching contributions into Roth accounts, if the employee chooses. And any age-based catch-up contributions must go into Roth accounts for participants earning more than $145,000.

4. Small nonprofits have more options to offer retirement plans

Nonprofits can now band together in pooled employer plans to streamline plan operations and gain more fiduciary support.

5. Employees could have easier access to their retirement accounts when experiencing an emergency or financial hardship

Participants now can self-certify withdrawals are for specific, immediate and heavy hardship needs. Employers also can now offer “sidecar accounts” employees can use instead of retirement funds for emergencies.

Why it all matters

Across the industry, plans and consultants continue to assess the effects of SECURE 2.0 in addition to the original 2019 legislation. Some provisions aren’t immediately implementable and there’s a cost to all of them. But knowing more about the options and their strategic value will help focus energies on what improves employees’ retirement well-being. For more on our latest thinking on SECURE 2.0, visit our online resource center.

Each provision has more to consider. Get more detail in the full TMRW publication here.Opens pdf

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