What the SECURE 2.0 Act Means for Employees and Employers

The SECURE 2.0 Act has ushered in a transformative period for retirement benefits, shaping the way employers manage and employees engage with their 401(k) plans. With provisions ranging from automatic enrollment to expanded eligibility for part-time employees, these regulations are designed to increase retirement savings and make retirement planning more inclusive.

This legislation also brings higher catch-up contributions for older workers, creating a retirement landscape that will encourage greater savings—and add layers of complexity for employers.

As businesses prepare to adapt, here’s an overview of how SECURE 2.0’s updates will reshape employee benefits across several key areas. (Note: SECURE 2.0 includes over 90 changes, so consult your 401(k) advisor or a trusted resource for a comprehensive view beyond these major updates.)

SECURE 2.0 Act Updates for 2025

1. Automatic Enrollment and Escalation for New Plans
One of the most significant changes is the mandate for automatic enrollment in 401(k) and 403(b) plans established on or after December 29, 2022. Beginning in 2025, eligible employees at companies with these newer plans must be automatically enrolled at a set contribution percentage.

This feature aims to increase both participation and savings rates by streamlining employees' entry into retirement planning. Employers must also incorporate automatic escalation, which gradually increases employee contributions over time, encouraging individuals to build their savings more effectively without requiring active decisions at each step.

Although these adjustments add administrative demands, employers that embrace automatic enrollment may ultimately see improved workforce stability as employees feel more secure in their financial futures.

2. Expanding Access to Part-Time Workers
The SECURE 2.0 Act also extends retirement plan eligibility to part-time employees. Previously, part-time employees who worked at least 500 hours annually for three consecutive years could contribute to a 401(k) without requiring employer matching. As of January 1, 2025, this provision covers employees who work 500 hours annually for just two consecutive years, enhancing access to retirement savings for part-time workers in both 401(k) and 403(b) plans.

This expanded eligibility could create a "dual-eligible" class of employees, which could require some employers to modify their administrative processes. Employers should proactively review plan documents and coordinate with advisors to ensure compliance with these new requirements.

Although this shift may initially add administrative complexity, the long-term impact could be substantial, allowing more workers—especially those with variable work schedules—to build their retirement savings.

3. Boosting Catch-Up Contributions for Aging Workers
SECURE 2.0 introduces a notable change to catch-up contributions, providing aging workers with an opportunity to increase their savings as they near retirement. Beginning in 2025, employees aged 60 to 63 can make catch-up contributions up to $10,000 annually or 150% of the standard age 50 catch-up limit, whichever is greater. This provision recognizes the need for some individuals to accelerate savings later in their careers and encourages financial readiness for retirement.

An additional shift in catch-up contributions is scheduled for 2026, where employees earning over $145,000 will be required to make their catch-up contributions as Roth contributions, meaning they will be made with after-tax dollars. Some employers may consider eliminating catch-up contributions altogether to avoid the complexities of Roth adjustments. Those who keep this option available will be offering a powerful benefit for employees focused on ramping up retirement savings in their final working years.

4. Key Exemptions and Compliance Considerations
There are several key exemptions worth noting. Government and church plans, as well as SIMPLE 401(k)s, are not subject to the auto enrollment and escalation mandates. Small businesses with fewer than 11 employees or that have been in operation for less than three years are similarly exempt. For employers who are unsure of whether they fall under these exemptions, a careful review of plan documents and consideration of TPA assistance is highly recommended.

The Road Ahead: Building Financial Security for Employees

The regulations introduced by SECURE 2.0 represent a notable shift toward making retirement savings more accessible and equitable. Automatic enrollment, broader eligibility for part-time employees, and enhanced catch-up contributions for older workers collectively address gaps in the current retirement system, making it more inclusive and responsive to the diverse needs of today’s workforce.

Adapting to these changes may require a learning curve, but SECURE 2.0’s provisions offer employers new ways to support employee financial security. This updated approach to retirement planning presents both challenges and opportunities, and organizations that incorporate these adjustments may help foster a more financially prepared and engaged workforce.