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SECURE 2.0 Provisions Effective in 2025

 While many of these provisions have already been implemented, there are a few on the horizon for next year. Here are a few key provisions taking effect in 2025:

• Expanding automatic enrollment (Section 101) - Requires automatic enrollment and automatic escalation for all 401(k) and 403(b) plans (with certain exceptions for collective bargaining plans, church plans, and governmental plans, as well as plans established on or before December 29, 2022). The initial automatic enrollment amount is at least 3% but not more than 10%. Each year thereafter, that amount is increased by 1% until it reaches at least 10% but not more than 15%.

• Higher catch-up limits (Section 109) - Increases catch-up limits to the greater of $10,000 ($5,000 for SIMPLE plans) or 50% more than the regular catch-up amount in 2025 for individuals who have attained ages 60, 61, 62, and 63. The increased amounts are indexed for inflation after 2025. (For example, if the standard catch-up contribution limit remains at $7,500 in 2025, a 60-year-old participant would be able to contribute an extra $11,250 to their retirement plan that year.)

• Long-term, part-time employees (Section 125) - The requirement to allow long-term, part-time workers to participate in an employer’s 401(k) plan is reduced to two years (from three years) and extends these rules to ERISA-covered 403(b) plans.

• Retirement savings lost and found (Section 303) - Requires the Department of Labor (DOL) to create and administer a national online searchable lost and found database for Americans’ retirement plans and requires plan administrators to provide annual reporting of disposition of balances for vested terminated participants.

• Automatic portability (Section 120) - Allows for the automatic transfer of retirement savings from a default IRA to a new employer's retirement plan. This provision is intended to reduce the loss of retirement plan assets and make it easier for employees to keep their savings when they change jobs.

These provisions along with the ones that have already been implemented aim to address the retirement savings gap. An employee’s ability to save for retirement depends greatly on the tools that are available to them. Recent studies show that employees are 15 times more likely to save for retirement if they have access to an employer-sponsored plan and 20 times more likely to save if contributions are automatic.

While many of the SECURE 2.0 Act’s provisions have yet to take effect, a strong argument can be made that the Act has been effective in removing barriers and increasing saving opportunities for employees. If you have any questions about these upcoming provisions and how they may affect your plan, please contact your Spectrum representative.