It is no surprise that the SECURE 2.0 Act continues to dominate the headlines. After all, it is one of the most significant pieces of retirement reform in decades. This Act will not only help employees obtain access to a workplace retirement plan, but it will also allow them to save more once enrolled in the plan.
Although 2025 may seem far away, it is never too early to start planning ahead. While most provisions will take affect within the next two years, it is important for plan sponsors and service providers to become familiar with the 2025 and later provisions so potential operational roadblocks can be addressed and changes can be quickly implemented when the deadline approaches.
Although this new legislation includes over 90 provisions, the following provides a high-level summary of selected provisions that are effective in 2025 and later.
Effective for ERISA Plans:
- Retirement savings lost and found – Almost 25 million 401(k) accounts with assets worth approximately $1.35 trillion were forgotten at the end of 20211. A national online searchable lost and found database would be created to help individuals find their retirement benefits. This database, housed at the Department of Labor, will enable retirement savers, who might have lost track of their pension or 401(k) plan, to search for the contact information of their plan administrator.
Effective no later than 2 years after the date of enactment of this Act, December 29, 2022.
Applicable plans: ERISA 401(a), 401(k), and 403(b) plans
- Performance benchmarks for asset allocation funds – This provision directs the Labor Secretary to update the DOL’s regulations so that an investment that uses a mix of asset classes can be benchmarked against a blend of broad-based securities market indices, provided the following:
a. The index blend reasonably matches the fund’s asset allocation over time.
b. The index blend is reset at least once a year.
c. The underlying indices are appropriate for the investment’s component asset classes and otherwise meet the rule’s conditions for index benchmarks.
This change in the disclosure rule allows better comparisons and aids participant decision-making.
Effective no later than 2 years after the date of enactment of this Act, December 29, 2022.
Applicable plans: ERISA 401(a), 401(k) and 403(b) plans
- Requirement to provider paper statements in certain cases – Defined contribution plans would be required to provide a paper benefit statement at least once annually. (The other three quarterly statements required for ERISA-covered plans can be delivered electronically.) For defined benefit plans, the statement that must be provided once every 3 years. Participants may elect to opt out and receive statements electronically.
The Labor Secretary must update the relevant sections of their regulations and corresponding guidance by December 31, 2024, and the annual paper statement is effective for plan years beginning after December 31, 2025.
Applicable plans: ERISA 401(a), 401(k), and 403(b) defined contribution plans, and 401(a) defined benefit plans
- Review and report to Congress relating to reporting and disclosure requirements – The Treasury Department, DOL, and Pension Benefit Guaranty Corporation are directed to review reporting and disclosure requirements for pension plans as soon as practicable after enactment of this Act.
Directs the agencies to make recommendations to Congress to consolidate, simplify, standardize, and improve such requirements no later than 3 years after the date of enactment of this Act, December 29, 2022.
Applicable plans: 401(a), 401(k) and 403(b) and 401(a) defined benefit plans
- Consolidation of defined contribution plan notices – the IRS and DOL are directed to amend regulations no later than two years after December 29, 2022, to permit a defined contribution plan to consolidate certain required plan notices.
Applicable plans: ERISA 401(k), and 403(b) plans
- Report on pooled employer plans – The DOL Secretary is required to conduct a study on the new and growing pooled employer plan industry.
A report on the findings of the study must be completed within 5 years, with subsequent reports completed every 5 years thereafter.
Applicable plans: ERISA 401(a), 401(k) and 403(b) PEPs
Effective for Defined Contribution Plans:
- Expand automatic enrollment in retirement plans – Studies show that automatic enrollment is effective in almost doubling plan participation. This provision will require 401(k) and 403(b) plans established on or after December 29, 2022 to automatically enroll new employees at an initial amount of 3% but no more than 10%. Each year thereafter that amount is increased by 1% until it reaches at least 10% (no more than 15%). Existing plans established before December 29, 2022 will not be impacted. There is an exception for small businesses with 10 or fewer employees, new businesses, church plans, and governmental plans.
Effective for plan years beginning after December 31, 2024.
Applicable plans: 401(k) and 403(b) plans
- Higher catch-up limit to apply at age 60, 61, 62, and 63 – For 2023, if you are at least 50 years old, you can contribute an additional $7,500 into a workplace 401(k) or 403(b) retirement plan ($3,500 for SIMPLE plans). This provisions adds another “special” catch-up contribution limit for employees aged 60 to 63. This annual catch-up contribution is the greater of $10,000 ($5,000 for SIMPLE plans) or 150% of the regular catch-up amount. The $10,000/5,000 amount will be indexed for inflation starting in 2026.
Effective for taxable years beginning after December 31, 2024.
Applicable plans: 401(k), 403(b), governmental 457(b), SIMPLE plans
- Exclusion of certain disability-related first responder treatment payments – First responders would now be permitted to exclude service-connected disability pension payments from gross income after reaching retirement age.
Effective for amounts received in taxable years beginning after December 31, 2026.
Applicable plans: 401(a), 401(k), 403(a), 403(b), governmental 457(b) plans
- Defined contribution plan fee disclosure improvements – The DOL must review its fiduciary disclosure requirements in participant-directed individual account plan regulations.
A report must be submitted to Congress within 3 years on such findings, including recommendations for legislative changes.
Applicable plans: 401(a), 401(k) and 403(b) plans
Effective for Defined Contribution Plans and Individual Retirement Accounts (IRAs):
- Saver’s Match – Starting in 2027, the nonrefundable Saver’s Credit for certain IRA and retirement plan contributions will be replaced with a Federal Saver’s Match contribution that is deposited into an IRA or retirement plan. The match is equal to 50% of the amount deferred by the participant up to $2,000 per individual. This translates into an extra $1,000 for every $2,000 contributed. The $2,000 may be reduced by certain distributions to the participant made within the past 3 years. The match is not available for tax filers who are under the age of 18, full time students, dependents or nonresident aliens. The match is only available if a participant’s modified adjusted gross income (MAGI) is as follows:
|50% Match if MAGI is below:||Phase-Out of 50% Match if MAGI is between:||
0% Match if MAGI at or above:
|$41,000||$41,000 – $71,000||$71,000|
Head of Household
$30,750 – $53,250
|Single/Separate filers||$20,500||$20,500 – $35,500||
Effective for taxable years beginning after December 31, 2026.
Applicable plans: 401(k), 403(b), governmental 457(b) plans, SIMPLE IRA, SARSEP and traditional IRAs
- Insurance-dedicated exchange-traded funds – Currently, exchange traded funds (ETFs) do not satisfy the regulatory requirements to be “insurance-directed.” The Treasury Department must update the regulations to reflect the exchange-traded fund structure to provide that ownership of an ETF’s shares by certain types of institutions that are necessary to the ETF’s structure would not preclude look-through treatment for the ETF, as long as it otherwise satisfies the current-law requirements for look-through treatment. This essentially would facilitate the creation of a new type of ETF that is “insurance-dedicated.”
Effective for segregated asset account investments made on or after 7 years after the date of enactment of this Act, December 29, 2022.
Applicable plans: 401(a), 401(k), 403(b) and 457(b) plans and IRAs
- Treasury guidance on rollovers – The Treasury Secretary is now required to simplify and standardize the rollover process by issuing sample forms for direct rollovers that may be used by both the incoming and outgoing retirement plan or IRA.
Development and release of the sample forms must be completed no later than January 1, 2025.
Applicable plans: 401(a), 401(k), 403(b), governmental 457(b) and IRAs
- Long-term care contracts purchased with retirement plan distributions – This provision would permit retirement plans to distribute up to $2,500 per year for the payment of premiums for certain specified long term care insurance contracts. These distributions are exempt from the additional 10% tax on early distributions. Only a policy that provides for high-quality coverage is eligible for early distribution and waiver of the 10% tax.
Effective 3 years after date of enactment of this Act, December 29, 2022.
Applicable plans: 401(a), 401(k), 403(b) and 457(b) plans, IRAs
Effective for Employee Stock Ownership Plans (ESOPs):
- Deferral of tax for certain sales of employer stock to employee stock ownership plan sponsored by S corporation – This provision expands the gain deferral provisions of Code section 1042 with a 10% limit on the deferral to sales of employer stock to S corporation employee stock ownership plans (ESOPs) if certain conditions are met.
Effective for sales made after December 31, 2027.
Applicable plans: ESOPs
- Certain securities treated as publicly traded in case of employee stock ownership plans – Certain non-exchange traded securities will qualify as “publicly traded employer securities” as long as the security is subject to priced quotations by at least four dealers on a Securities and Exchange Commission-regulated interdealer quotation system, is not a penny stock, is not issued by a shell company and has a public float of at least 10% of outstanding shares. These updates will allow highly regulated companies with liquid securities that are quoted on non-exchange markets to treat their stock as “public” for ESOP purposes, thus making it easier for these companies to offer ESOPs to their U.S. employees.
Effective for plan years beginning after December 31, 2027.
Applicable plans: ESOPs
The SECURE 2.0 Act affects all retirement plan types, low to high income workers, and small businesses looking to attract and retain talent through a workplace retirement plan. This legislation also helps streamline administrative procedures and plan rules.
As a reminder, any plan amendments needed as a result of this new legislation must be adopted by the last day of the first plan year beginning on or after January 1, 2025. (e.g., the deadline for a calendar year plan is December 31, 2025.) This deadline is extended two years for certain governmental and collectively bargained plans.
TRI-AD is working diligently to align our operations and service delivery to comply with the mandatory SECURE 2.0 provisions that will be effective within the next 2 years. However, the IRS and the DOL must provide guidance on how to administer most of these provisions. The IRS is heavily-tasked with providing guidance not only for the 2023 provisions, but provisions that are effective in 2024 and thereafter. Employers may want to delay implementation of any optional provisions until further guidance is provided.
TRI-AD’s compliance team will provide additional information concerning the SECURE 2.0 Act in the coming months. Please contact your TRI-AD Client Service Manager if you have questions.
 Capitalize/ Bankrate, www.bankrate.com/retirement/how-to-find-lost-401k/
TRI-AD and our Associates’ suggestions or recommendations shall not constitute legal advice. No content on our website can be construed as tax or legal advice and TRI-AD may not be considered your legal counsel or tax advisor. Clients are encouraged to consult with their tax advisor and/or attorney to determine their legal rights, responsibilities, and liabilities. This includes the interpretation of any statute or regulation, federal, state, or local; and/or its application to the clients’ business activities.