The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, signed into law in December 2022, introduced numerous changes to enhance retirement savings and security. While many provisions took effect in 2023 and 2024, several significant changes become applicable in 2025. Employers, retirement plan sponsors, and participants should take note of these upcoming changes to optimize their retirement strategies.

1. Expanded Automatic Enrollment and Escalation for New Plans

Beginning in 2025, most new 401(k) and 403(b) plans must include an automatic enrollment feature. Key aspects of this requirement include:

• Initial automatic enrollment at a rate of at least 3% but not more than 10% of an employee’s salary.
• Automatic escalation of at least 1% per year, up to a minimum of 10% and a maximum of 15%.
• Employees can opt out, but the default ensures greater participation.

This rule applies only to new plans established after December 29, 2022, and does not impact existing plans. Businesses with 10 or fewer employees and new businesses (less than three years old) are exempt.

2. Student Loan Matching Contributions

To help employees juggling student loan debt, the SECURE Act 2.0 allows employers to match student loan payments with contributions to their retirement accounts, effective in 2025.

• If an employee makes qualifying student loan payments, the employer can contribute a matching amount to the employee’s 401(k), 403(b), SIMPLE IRA, or 457(b) plan.
• This helps workers who might otherwise miss out on employer contributions due to focusing on student debt.

Employers should evaluate how to implement and communicate this discretionary benefit to eligible employees.

3. Starter 401(k) and 403(b) Plans for Small Businesses

To encourage more small businesses to offer retirement plans, Starter 401(k) and 403(b) plans become available in 2025. These simplified plans:

• Are designed for employers who do not currently offer a retirement plan.
• Require auto-enrollment with a default contribution rate of 3% to 15% of pay.
• Have annual contribution limits equal to the IRA contribution limits ($6,500 in 2023, plus a catch-up for those 50+).

This provision aims to expand retirement coverage among small businesses and part-time workers.

4. New Catch-Up Contributions for Mid-Career Savers

A major change in 2025 affects catch-up contributions for individuals aged 60 to 63:

• Those in this age group can make higher catch-up contributions of the greater of $10,000 or 150% of the standard catch-up limit for their plan.
• The $10,000 amount will be indexed for inflation annually.

This provision provides additional savings opportunities for workers approaching retirement.

5. Long-Term Part-Time Employee Eligibility Expansion

SECURE Act 2.0 builds on the original SECURE Act (2019) by expanding retirement plan eligibility for part-time employees:

• Starting in 2025, employees who work at least 500 hours per year for two consecutive years will be eligible for 401(k) plan participation.
• Previously, the requirement was three years under the original SECURE Act.
• The employer needs to allow these employees access to the plan but they do not need to provide an employer contribution

This change accelerates access to retirement benefits for part-time employees, particularly impacting industries with a high number of part-time workers.

6. Emergency Savings Linked to Retirement Plans

Starting in 2025, employers can offer a pension-linked emergency savings account (PLESA) to non-highly compensated employees. Key details:

• Employees can contribute up to $2,500 to an emergency savings account within their retirement plan.
• Contributions are made post-tax, but withdrawals are penalty-free.
• Employers may offer matching contributions on these savings.

This provision allows workers to build short-term savings without compromising long-term retirement security.

7. Catch-Up Contributions for High Earners

The SECURE 2.0 Act of 2022 requires high earners to make catch-up contributions to Roth accounts starting in 2026. This means that contributions will be made with after-tax dollars.

• The rule applies to catch-up contributions made by people age 50 or older who earned more than $145,000 in the previous year, adjusted for inflation
• The rule applies to qualified plans, including 401(k), 403(b), and 457(b) plans
• The rule does not apply to SIMPLE IRAs

• In 2025, individuals earning $145,000 or less, adjusted for inflation, can still make pretax 401(k) catch-up contributions

The rule is intended to ensure that higher-income earners pay taxes on their catch-up contributions during their peak earning years.  This could help reduce their tax burden during retirement

What Employers and Plan Sponsors Should Do Now

With these upcoming changes, employers and plan sponsors should begin preparations, including:

• Reviewing and updating plan documents and payroll systems to comply with automatic enrollment and catch-up contribution provisions.
• Exploring student loan matching options and updating payroll systems accordingly.
• Considering the Starter 401(k) option if they currently do not offer a retirement plan.
• Educating employees about new catch-up limits and emergency savings accounts.

SECURE Act Continues to Change Retirement 

The SECURE Act 2.0 continues to reshape the retirement landscape, with 2025 bringing several important changes aimed at expanding coverage, increasing savings opportunities, and enhancing flexibility. Employers, HR teams, and retirement plan administrators should take proactive steps to ensure compliance and maximize the benefits of these new provisions.

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