Oceans Rise, Empires Fall, It’s Much Harder When It’s All Your Call … SECURE 2.0—What Comes Next?

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By Kevin Selzer

We have now had a couple of months to review and digest SECURE 2.0 (and its roughly 90 provisions impacting retirement plans). If plan sponsors haven’t done so already, it is time to roll up their sleeves and put a triage list together on these law changes. Below are some suggestions on where to start:

  • Required Roth Contributions for Certain High Paid Participants. This provision requires participants who earn more than $145,000 (indexed beginning in 2025) to contribute catch-up contributions on a Roth basis. While this change is not effective until 2024, sponsors should be working with recordkeepers and payroll now to ensure their systems are ready. T-minus nine months and counting.
  • Ongoing Plan Corrections. Plans that have existing operational errors in the process of being corrected should evaluate how SECURE 2.0 impacts those corrections. The retirement plan correction procedure was expanded and modified, particularly related to overpayments and correction of “significant” operational errors.
  • Hardship Self-Certification. Plans may now allow participants to self-certify hardship distributions. Consider whether to adopt this change. See our prior post on this.
  • Plans in Retail, Hospitality, Healthcare, and Other Industries With Significant Part-Time Workers.
    • SECURE 2.0 reduced the number of consecutive years a long-term part-time worker must provide services to gain eligibility for elective deferral purposes in ERISA-covered 401(k) and 403(b) plans (from three years to two). While the SECURE 2.0 reduction does not go into effect until 2025, the SECURE (1.0) provision goes into effect in 2024. Discussion should be happening now (if it hasn’t happened already) on whether to allow part-time workers into the plan immediately for deferral purposes, rather than tracking their hours.
    • Plans in these industries may also want to consider adopting the relief on providing notices to certain unenrolled participants (effective now) and relief aimed at worker reluctance to participate (such as the new emergency distribution provision and Roth-like savings account, known as the PLESA—both effective in 2024).
  • Roth Employer Contributions. Plans are permitted to allow participants to elect employer contributions to be made on a Roth basis. While this change is technically effective now, we do not think that recordkeepers are operationally ready to implement this. We are also recommending sponsors exercise patience on implementing this change until some of the unanswered questions are clarified—e.g., character of the tax from the Roth contributions (including, reporting, and withholding), application to employer contributions that have graded vesting schedules, etc.