SECURE 2.0: The Highlights You Need to Know


I’m sure that most people have heard rumblings about changes coming to us for 401(k) (retirement) plans. If not, then that’s okay. Most of what is trendy takes a little while to settle into true application for the general public, and that takes even longer if it’s “401(k) trendy.”

If you’re in the 401(k) industry, you’ve probably heard so much about this that it’s become a monotonous drone at the back of your head. Let me add to that droning, but hopefully with succinct and digestible information.

The purpose of this article is to highlight what changes are immediately effective, what is on its way, and the future landscape we can expect from the recent SECURE 2.0 Act, which was part of the $1.7 trillion behemoth spending bill that went through congress and was signed into law in December 2022. 

Keep in mind, even if these changes are effective right now or the near future, business owners may need to specifically adopt them into their 401(k) plan in order for them to directly apply. Also, there are many items in this legislation that I will not list here as they don’t necessarily apply at the moment, and updates will assuredly occur throughout this year. 

2023 Updates 

Effective 2023

  • Increased tax credit for business under 50 employees of 100% of their costs in the 401(k) Plan. This is capped at $5,000 per employer.
    • A tax credit of up to $1,000 per employee for employer contributions the first year of the 401(k) plan
    • The $1,000 credit does not apply for employees making more than $100,000
    • This credit phases out each year by 25%
    • This credit only applies to businesses with less than 100 employees
  • Required Minimum Distributions (RMDs) are no longer required for Roth accounts. 
  • Financial incentive (de minimis amounts) can be provided to employees by an employer to help persuade employees to participate in the 401(k) plan (more information will come out about what is considered “de minimis”)
  • Employer match and non-elective contributions can be submitted as Roth. This would need to be added to the plan by the plan sponsor, and elected by the employee.
  • Reduce excise RMD tax from 50% to 25%
  • 403(b) Multiple Employer Plans (MEPs) now allowed (401GO offers a 403(b) Syndicate, but Congress probably didn’t know that!)
  • Hardship distribution documentation no longer required from participants. In other words, they can self-certify the financial need. 
  • Solo-k plans can now make employee elective deferrals in the following year before filing their taxes. (It used to only apply to employer contributions.)
  • The RMD age has been pushed forward even more. Those who turn 72 in 2023 or later will not have to take the RMD until age 73. Those who turn 74 in 2023 or later can wait until age 75.
  • Disaster distributions, or participants taking a distribution impacted by disasters can take up to a maximum of $100,000 or 100% of their account. Early withdrawal penalties do not apply to those requests under $22,000.

2024 Updates 

Effective 2024

  • Long-term, part-time employees who have worked at least 500 hours each year for three years (started in 2021) will be eligible to participate in the 401(k).
  • Starter-k plans are now available to businesses with fewer than 50 employees. These function as an employee-deferral 401(k) plan with IRA limits. No required nondiscrimination testing. Automatic enrollment is required starting at 3% to 15%. 
  • SIMPLE IRA and SIMPLE 401(k) plans can now end mid-year and adopt a 401(k) plan (no longer needing to wait until the end of the year). The 401(k) plan must be Safe Harbor mid-year, otherwise they’ll have to wait until the following year.
  • Emergency distributions allowed up to $1,000 each year, with the option to pay back the distribution within three years. The 10% early withdrawal penalty has been removed. Participants can self-certify the need.
  • Increased catch-up for those ages 60-63 to contribute a higher amount ($10,000). Catch up for 2023 is currently $7,500.
  • Catch-up contributions must be Roth for employees that make over $145k+. More guidance will be provided with regard to compensation on this one.
  • Employees’ student loan payments can count as 401(k) deferrals. This allows them to receive an employer match, even though the participant’s contribution went to the loan rather than the 401(k). This is not required, but is an option employers can adopt.
  • Loosening top heavy testing rules to allow for separate testing on excludable and non-excludable employees (those who reach statutory requirements and those who don’t with regard to eligibility)
  • Ownership control group no longer required between spouses who own two separate unrelated businesses (removing requirements to have to test these together)
  • Plan cash-out rules can be increased from $5,000 to $7,000
  • Government lost & found for retirement accounts will be available online
  • No-penalty 401(k) withdrawals for domestic abuse victims 
  • Optional emergency savings accounts can be linked to a 401(k) plan. These will be employer-elected, can allow up to $2,500, and must be Roth. Employees may be automatically opted in at no more than 3% of their pay. Withdrawals from this account would be penalty-free.
  • Discretionary amendment to increase benefits to employees would be allowed at any date in the preceding year. This does not apply to increasing matching contributions.
  • Hardships allowed (like 401(k)) for ERISA 403(b) plans. The employer would have to elect to have it in the plan, but it can come from all money sources like what is allowed in a 401(k) plan.

2025 Updates 

Effective 2025

  • Automatic enrollment will be required for any employer starting a new 401(k) or 403(b) plan after December 31, 2024, if it has more than 10 employees, and has been in business for at least three years.
    • Automatic enrollment starts at 3% (not less) to 10% and will automatically increase by 1% per year up to 15%. Any election (including opt-out) would exempt employees from the automatic enrollment and escalation feature.
  • Long-term, part-time employees who have worked at least 500 hours each year for two years will be eligible to participate in the 401(k). 
  • Catch-up increases even more to the greater of $10,000 or 150% of the 2024 limit for those ages 60-63.

2026 Updates

Effective 2026

  • Required annual paper statement to be mailed to participants

Additional SECURE 2.0 Details

Now, since you’ve gotten this far through reading all of this, I’m sure you’re wondering if there are any SECURE 2.0 details that aren’t included in this article. The answer is most certainly yes. Multiple factors affect all facets of retirement plans and accounts. The above are those that I felt to be the most applicable.

If these changes have made you consider starting a new 401(k) plan, or making updates to your existing plan, please contact the team at 401GO. We would be happy to walk you through the process.

Now, carry on and keep saving your own world!

Secure your future today. Enroll in your 401(k) plan now.

Jared Porter
Jared is 401(k) expert and early-morning basketball enthusiast. He enjoys explaining complicated retirement issues in simple ways.
Secure your future today. Enroll in your 401(k) plan now.