SECURE Act 2.0: Frequently Asked Questions

In response to Congress’s 2022 passing of SECURE 2.0, states have begun requiring private businesses to provide employee retirement plans. Employers can opt into a state-sponsored program or find their own provider. More than 30 states have considered enacting state-mandated retirement plan legislation, and 17 states now have laws enabling state-sponsored retirement plans.

What is the SECURE 2.0 Act?

The SECURE 2.0 Act, enacted on December 29, 2022, introduces comprehensive modifications to 401(k) plans, especially those managed by small businesses. With aims to broaden coverage, amplify retirement savings, and streamline retirement plan regulations, the law has a lot to offer. All employers should familiarize themselves with these changes to guarantee their 401(k) plans align with the new requirements by the effective date.

Key Changes Employers Should Know

The SECURE Act 2.0 has made sweeping changes to how employers will handle employee retirement savings. Below are some of the critical changes that you should understand as an employer. 

Pooled Employer Plans (PEP): The act includes further clarifications and enhancements regarding Pooled Employer Plans (PEPs).

Automatic Enrollment Requirements: The bill encourages employers to automatically enroll their workers in company retirement plans, potentially increasing the default savings rate.

Required Minimum Distributions (RMDs): The age requirement to begin taking RMDs will increase from 72 to 73 in 2023 and age 75 in 2033.

Catch-up Contributions: As employees move closer to retirement age, they can contribute more to their retirement savings. Participants aged 50 and older can contribute an extra $7,500 annually to their 401(k) account. This amount will increase to $10,000 per year starting in 2025 for participants ages 60 to 63.

Long-Term Part-Time Employees: Starting in 2025, part-employees (those who worked between 500 and 999 hours) will be eligible to participate in their company's retirement plan after two years.

Saver's Match: Beginning in 2027, employees earning up to $71,000 per year will be eligible for a federal matching contribution of up to $2,000 per year that must be deposited into their retirement savings account. 

Student Loan Matching: Beginning in 2024, the bill would allow employers to make matching contributions to a retirement plan based on an employee's student loan payments, thereby assisting those paying down student debt to save for retirement simultaneously.

Small Business Incentives: There are provisions to provide tax credits and incentives for small businesses to establish and maintain retirement plans.

Horizon Hosted a Webinar on the SECURE 2.0 Act

In October 2023, Horizon and saveday hosted a webinar about the SECURE 2.0 Act to provide an overview of the upcoming changes and to help answer your questions. If you want to watch a screen recording of the recent webinar, contact Scott Langer via email at scottl@horizonpayroll.com. 

Here are a few key takeaways from the webinar:

• SECURE 2.0 Act Overview: SECURE 2.0 Act and its implications for employer-sponsored retirement plans, such as 401(k)s and Pooled Employer Plans (PEPs).
• Retirement Plan Breakdown: Discuss 401(k)s, Pooled Employer Plans, and State-Sponsored Plans - and which options are best for your business. 
• Introducing Horizon's New Pooled Employer Plan: Discover the advantages of Horizon's new Pooled Employer Plan and how it can benefit your business.
• Q&A Session: We received great questions from attendees and our experts provided helpful answers that can benefit all businesses.

View the slides covered during the webinar presentation.  

SECURE ACT 2.0 Frequently Asked Questions

What Does The SECURE Act 2.0 Mean For Me As An Employer?

The SECURE 2.0 Act makes sweeping changes that impact all employers, including auto-enrollment, part-time employee eligibility, incentives to participate, starter plans, and federal tax credits. These changes are intended to increase participation and contribution rates for employees, while also making it easier and more affordable for employers to set up plans and cover more of their workforce.

How Does The Federal Tax Credit Work?

Before SECURE 2.0, employers with fewer than 100 employees were eligible for a tax credit of up to 50% of administrative costs within the first 3 years of starting their plans, with an annual limit of $5,000. SECURE 2.0 increases the credit from 50% to 100% for eligible employers with up to 50 employees. An additional credit of up to $1,000 per employee is available for eligible employers with up to 50 employees, but phases out from 51 to 100 employees.

What Type of Plans Qualify?

Qualified employer plans that may claim the tax credit under section 4972(d) include 401(k) plans, SIMPLE plans, and simplified employee pensions (SEP).

Can I Get Federal Tax Credit For Matching?

Employers that set up a new plan can claim a credit of up to $1,000 per employee on employer contributions (for businesses with up to 50 employees; lower credits are available for businesses with 51-100 employees). The credit gradually phases out over 5 years. Employers with existing plans are not eligible for this particular credit.

What Is Considered a "Small Employer"?

SECURE 2.0 increases the startup credit from 50% to 100% for small employers. In the context of the retirement plans startup cost tax credit, a small business is capped at 50 employees.

What Else Has Changed Due To The SECURE 2.0 Act?

In response to SECURE 2.0, states have begun rolling out legislation mandating private employers to offer retirement plans. Employers have the option to find a private provider or opt into the state-sponsored plan, which typically offer IRAs only. 17 states now have laws enabling state-sponsored plans, and over 30 states have considered state-mandated retirement plan legislation.

SECURE 2.0 contains almost 100 changes to retirement savings plans, from Required Minimum Distributions to student loan payments to automatic escalation and more. This act demonstrates that the legal tailwinds are pushing all employers to offer retirement plans - and saveday is THE $0 employer-cost solution!

Horizon Can Help You Choose Retirement Plans

Whether you're interested in a traditional 401(k), or a pooled employee retirement plan, we have the expertise to guide you through the process! At Horizon, our team of experts is here to assist you every step of the way. We'll explain the benefits of each option, help you make an informed decision, and assist with plan implementation and administration. 

Contact Us Today for a Consultation

If you're ready to take the next step in enhancing your employee benefits package with a retirement plan, don't hesitate to reach out to Horizon today. Contact us for a consultation, and let us show you how we can help you attract and retain top talent while simplifying your benefits administration.