By now, I’m guessing that most people reading this have heard that the Secure Act 2.0 was passed by Congress and signed into law late last year. The second iteration of the Secure Act was crafted with the intention of increasing employee retirement savings while also expanding access to company retirement savings plans.
With its passage comes a load of information and changes that can be difficult to digest and determine what is impactful to your company’s plan. The answer for existing plan sponsors in 2023 is likely very little. One of the things Congress absolutely got right with Secure 2.0 is having a fairly spread-out timeline for when different rules/features become effective so that no plan sponsor is scrambling to launch a new program, etc. at the same time they’re completing all of the required year end tasks.
Instead of walking you through every rule/feature/change included in the bill, I wanted to focus on three things that I think will be the most impactful to existing plan sponsors and their employees over the course of the next few years. They also happen to be my three favorite parts of the new rule.
- Retirement Savings Lost and Found (Effective 2025) – Something we often run into is a new employee mentioning they have an old 401(k) from another company but they have no idea where it’s at. That can be frustrating for employees and plan sponsors trying to locate where their retirement savings are when they want to consolidate accounts. The DOL is going to launch a virtual lost and found for employees to log in and see where their accounts are and likely this will include basic contact information for the recordkeeper too. This will simplify the search process greatly, but most importantly, employee’s savings will be easier to consolidate so they can be managed and included in their retirement plan.
- Student Loan Payment Match (Effective 2024) – Employers who sponsor a 401(k) plan will now have the option to treat student loan repayments as a retirement plan deferral. By doing this, employees would still be able to receive the matching contributions. This won’t be impactful to all employers, but those who hire a good amount of employees straight out of college will now be able to offer a unique benefit to help their employees shred their debt earlier at little to no additional cost to the plan sponsor. This benefit will be a great opportunity for employers to attract and retain top talent. It’s important to note that the supporting technology and proper administration policies of this new feature are not yet ready for launch and may not be ready for the official debut.
- Increased catch-up contributions (Effective 2025) – Secure 2.0 created a second “tier” of catch-up amounts for later career savers. Starting in 2025, those between 60-63 will be able to save even more than before. More retirement savings for employees can only lead to better retirement portfolio outcomes. As we always say, no one we’ve met with has ever said “I wish I saved less.”
Naturally, the list of new rules and regulations includes many more things that employers will need to sort through over the coming years. The majority of the heavy lifting around these changes will be handled primarily by recordkeepers and third-party administrators, but all will impact plan sponsors in a meaningful way.
If you have questions or concerns regarding the new legislation and how it impacts your company’s retirement plan or need someone to sit down and review your current plan to see what impacts there may be to you or your employees, give us a call. We love having these conversations with plan sponsors.
Written by Matt Kruckenberg, Manager of Retirement Plan Services. Matt can be reached at 614-907-8639 or email@example.com