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  • Writer's pictureBookspring Team

SECURE 2.0 Act Brings Big Retirement Changes



ADP has a great article explaining in more detail the new changes coming. Check out some of the Highlights below!

Automatic Enrollment.

Employers who start new retirement plans after December 29, 2022, will be required to (starting in 2025) automatically enroll employees in their retirement plan at a minimum of 3 percent, but not more than 10 percent of eligible wages. However, employees may opt-out. New companies (in business for less than three years) and employers with 10 or fewer workers are excluded from this requirement.


Automatic Escalation.

Beginning in 2025, contribution percentages must increase by 1 percent on the first day of each plan year until the contribution is at least 10 percent, but no more than 15 percent of eligible wages.

*Exceptions apply for governmental and church plans, businesses with 10 or fewer employees, and employers that have been in business for less than three years.


Eligibility for Long-Term, Part-Time Employees.

Effective in 2025, employees who work between 500 and 999 hours for 2 consecutive years must be allowed to participate in their company's retirement plan. However, this does not apply to employees who participate in collectively bargained plans or nonresident aliens.


Treatment of Student Loan Payments for Matching Contributions.

Beginning in 2024, employers can contribute to their company retirement plan on behalf of employees who are paying student loans instead of saving for retirement.


Emergency Savings Accounts Linked to Retirement Plans.

Beginning in 2024, retirement plans may offer linked "emergency savings accounts" that permit non-highly compensated employees* to make Roth contributions to a savings account within the retirement plan. Balances in an emergency savings account (Which is up to $2,500) must be able to be withdrawn at least once per month. Withdrawal transactions are penalty-free and do not need to show a qualifying emergency.

*Note: The IRS Definition of a highly compensated employee is an individual who:

  • Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or

  • For the preceding year, received compensation from the business of more than $125,000 (if the preceding year is 2019, 130,000 if the preceding year is 2020 or 2021, $135,000 if the preceding year is 2022), and $150,000 (if the preceding year is 2023) and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.

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