SECURE Act 2.0 Looks to Improve Retirement Benefits for American Workers

With an economy still sputtering along with an inflation rate north of 6% and a burgeoning number of baby boomers inching their way toward the ends of their careers, workers could be forgiven for worrying about how they’ll make it in retirement.

Congress did their part to try to lessen that fear by passing the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 late last year.

It’s an extension of the original SECURE Act, signed into law in 2019 by then-President Donald Trump. Both the original act and it’s successor passed with high bipartisan support.

“In 2019, Congress passed the original Secure Act, which also expanded access to retirement accounts for workers,” Corie Wagner, Senior Editor, Industry Research at in Los Angeles, told Forbes Magazine. “Similarly, one of its goals was to help Americans save more money for retirement. However, millions still feel very unprepared financially for life in retirement, so those original provisions may not have gone far enough.”

Chris Burke, senior consultant for retirement plans for Detroit-based Lovasco Consulting Group, said the need for an updated version of the SECURE Act was driven by a “constant objective” in Congress to simplify retirement plans and “make them a better fit.”

“The goals were to try and expand retirement plan access and make it easier for both employees and employers,” said Burke, who got his juris doctor from Wayne State Law School and a bachelor’s degree from the University of Michigan. “(SECURE Act 2.0) was a combination of three different proposals that came together, and it was really done at the last minute last year. There were some particular congressmen and women who were going to retire at the end of the year, so if it didn’t get done at the end of last year, it wasn’t going to get done at all.”

Burke, who in 2022 and 2023 was named by the National Association of Plan Advisors as a top 100 advisor in the country under 40 years old, was the keynote facilitator in a webinar, “SECURE Act 2.0: What Employer’s Need to Know,” put together by the Naitonal Association of Business Resources in partnership with the Best & Brightest Programs, Corp! Magazine and MichBusiness.

Burke said the new act is a combination of three different bills that came together. There were a lot of provisions that were proposed; some didn’t make it in, but “for the most part, the provisions that were passed were talked about for over a year.”

“All of these had to have bipartisan support,” Burke said. “There were eight committee members who hashed out the final language, from both sides of the aisle. Nothing in it is controversial on either side of the aisle; it had support on both sides.”

According to Burke, the legislation’s main goals are:

  • To boost plan formation among small employers.
  • Expand retirement plan coverage; offering retirement plans to part-time employees
  • Increase retirement savings
  • Encourage employees to save
  • Simplify some plan corrections
  • Allow employees access to emergency savings in retirement plans

“I think there was an effort to kind of Roth-ify defined contribution plans because it helps to raise revenue,” he said. “I think we’re going to continue to see that.

“Our government’s debt situation – this isn’t a poltical statement at all, I think this is gonna be an issue regardless of what happens politically – from a debt to GDP ratio we’re not in a great spot with federal finances and it’s projected to get worse,” he added. “I think pulling forward some of that tax revenue is going to be a continued theme in the future.”

In what Burke called a “unique aspect” of SECURE Act 2.0 is the fact it’s phased in over several years. Some provisions are immediate, others don’t become effective until 2024 and 2025.

Provisions effective this year include:

  • Roth Employer Contributions — Employers may now choose to offer matching or nonelective contributions as Roth contributions.

While the act makes these effective this year, Burke said they aren’t likely to become a factor until late summer.

“The IRS still has questions to answer about the plan,” Burke explained. “There’s a lot to think through for the IRS. The pros to this: it provides more tax diversification for employees. And from an employer’s standpoint, it helps them offer a more robust retirement package.”

  • Small Incentives for Contributing to a Plan –– Applaud good savings behavior by offering small rewards to employees who participate in a 401(k) or 403(b) plan. In the retirement industry, this is casually referred to as the “gift card” section.
  • Tax Credits — For new retirement plans, companies with up to 50 employees can claim up to 100% of the start-up administration costs (max $5,000). And for employees who make less than $100,000, employers can claim an additional $1,000 per person, to which employers could apply the credit toward a matching contribution (max $50,000).

Provisions available in 2024, according to Lovasco, include:

  • Roth-Required Catch-Up Contributions — For participants over age 50 looking to max out retirement savings through catch-up contributions, if the employee earns more than $145,000, those contributions must be Roth contributions. If the employee earns less than $145,000, they can choose either pre-tax or Roth contribution type. Reminder: Plans need to allow for Roth contributions in order for this to be available.
  • RMDs Not Required for Roth 401(k) and 403(b) Accounts –– Retirement plan savings in designated Roth 401(k) and 403(b) accounts are no longer subject to RMD rules. This means employees’ accounts can continue growing tax-free.
  • Emergency Withdrawals — An employee may claim a personal emergency and access up to $1,000 from their retirement plan. They can take one distribution per year and have the option to repay it within three years. They can take another distribution if repaid and have another personal emergency expense. If not repaid within three years, they cannot take another distribution.
  • Matching Student Loans — For employees who are paying down student loans, employers will be able to apply the retirement plan’s matching formula to that repayment amount and deposit the match into the workplace retirement savings plan. This helps the employees save for retirement while getting out of debt.

Burke pointed out that a study done by Fidelity showed employer-sponsored student loan assistance can reduce employee turnover by some 78%. But a poll taken during the webinar showed that 78% of respondents said their companies “weren’t considering this yet.”

“I think this is an area where employers underrate the impact it can have on retention,” Burke said. “I know retention has eased up as a need, given the state of the economy, but this could be really sticky in terms of keeping employees engaged or even at the organization, so it’s something I recommend (companies) think about.”

  • Force-Out Rollover Limit — Under current law, employers may transfer former employees’ retirement accounts from a workplace retirement plan into an IRA if their balances are between $1,000 and $5,000. This section increases the upper limit from $5,000 to $7,000.
  • Automatic Portability –– This provision makes it easier to move retirement accounts from a former employer to a new employer. By allowing for automatic portability, it helps to reduce future missing participant issues, supports employers with clean participant data, and helps employees by consolidating retirement savings accounts.
  • “Side Car” Emergency Savings Account –– New payroll deduction account that is for short-term emergencies. Non-highly compensated workers could be automatically enrolled at 3% and save up to $2,500 in this Roth account. They can access the account tax and penalty-free.  

Provisions available in 2025 include:

  • Improving Retirement Plan Access for Part-Time Workers  — Long-term, part-time employees who meet the eligibility requirements will be allowed to save through the company’s retirement plan. For part-time employees, it is important to have a good time-tracking system in place because eligibility rules are retroactive. The stated eligibility rules are for employees who work for two consecutive 12-month periods, during each of which they have at least 500 hours of service. Employers are not required to match contributions. Effective January 1, 2025.
  • Automatic Enrollment and Escalation| Retirement Savings on Autopilot  — All new 401(k) and 403(b) plans are required to automatically enroll participants and auto-escalate savings. The employer will set the initial deferral amount between 3 – 10%, and the deferral amount increases by 1% up to 10 – 15% retirement savings per year.  
  • Higher Catch-Ups for 60 – 63 Years Old Employees — Employees between 60 – 63 years old looking to maximize retirement savings will be allowed to increase their catch-up contribution to $10,000 in 401(k), 403(b), and governmental plans. The catch-up must be a Roth contribution for individuals who make more than $145,000.  

The American Retirement Association issued a press release extolling the virtues of SECURE Act 2.0.

“We are grateful to the many members of Congress and staff who worked tirelessly to get SECURE 2.0 included in the omnibus legislation enacted this week,” Brian Graff, CEO of the American Retirement Association in Washington, DC, said in the release. “This important legislation will enhance the retirement security of tens of millions of American workers—and for many of them, give them the opportunity for the first time to begin saving.”

According to Forbes, conducted an online survey last spring of 1,028 U.S. adults. The group’s website says, “While 7 in 10 American workers had never heard of SECURE 2.0 legislation, they support many of its retirement savings provisions.”

Burke said a couple of things in the legislation – provisions for automatic enrollment and automatic increases – may not be popular, but they likely are necessary. Lovasco recommends both as “strong best practices.”

“Some people think those are invasive practices, but this is the problem we’re trying to solve,” Burke said. “Retirement savings are not nearly good enough in the U.S., and the employer is in the best position to impact that from a plan design standpoint.

“If you don’t stick up for your employees, they’re probably not going to stick up for themselves, and nobody else is, either,” he added.

What do retirement savings look like in the U.S. Burke said a Vanguard survey shows the average plan participant has a $112,000 average balance, while the median balance is only $27,000. Imagining a 4% withdraw rate recommended by most financial planners, a plan with a $100,000 balance yeileds about $4,000 a year.

“I don’t need to tell you that’s not nearly enough money to be able to retire,” Burke said. “Some of the rationale behind this bill is to improve the situation.”