When Workers Are Financially Stressed, Everyone Pays the Price

Below, we’ve summarized key new mandatory and optional provisions of SECURE 2.0. Additional details can be found here: SECURE 2.0: What Employers Need to Know for 2025.

Super Catch-Up Contributions for Ages 60-63 (Optional)

For older retirement plan participants, the additional catch-up contribution (referred to as the “super catch-up contribution”) allows for increased deferrals between ages 60 and 63. Below is an overview of the catch-up limits for 2025.

Roth Catch-Up Contributions for High-Wage Earners (Mandatory)

Beginning next year on January 1, 2026, participants in 401(k), 403(b) and governmental 457(b) plans who earned more than $145,000 in FICA wages in the prior year will be required to make catch-up contributions on a Roth (after-tax) basis. Participants who earned less than $145,000 in FICA wages for the preceding calendar year must be given the option — but are not required — to make catch-up contributions on a Roth basis.

USICG’s benchmarking studies show 88% of retirement plan sponsors offer Roth catch-up contributions.

Employer Contributions Treated as Roth Contributions (Optional)

Employers may allow plan participants to receive employer-matching and nonelective contributions on a Roth (after-tax) basis. Employers offering this option must follow the IRS’s guidance for the implementation and potential tax impacts for employees. USICG recommends employers consult with trusted tax professionals and payroll providers to weigh the benefits and challenges of the option.

Participants with both pre-tax and Roth contributions have account balances that are 43% higher compared to those with no Roth contributions.³

Expanded Coverage for Long-Term Part-Time (LTPT) Workers (Mandatory)

Beginning January 1, 2025, LTPT employees who are at least 21 years old and have completed at least 500 hours of service in two consecutive years are eligible to contribute to their employers’ 401(k) or 403(b) savings plan. However, employers are not obligated to provide additional matching contributions for LTPT employees due to this rule change.

It's important to note that the employer is responsible for tracking the hours and notifying their service provider of LTPT employees eligible to participate. Rather than tracking hours, some employers are choosing to amend their plan documents to allow all part-time employees to participate.

Employer Matching Contributions on Student Loan Payments (Optional)

In August 2024, the IRS published Notice 2024-63 issuing interim guidance on qualified student loan payment matching contributions to help employees who have not been able to save for retirement because of overwhelming student loan debt. Employers may make matching contributions to the retirement plan based on a participant’s student loan payments, as if those payments were elective deferrals to the plan.

Self-Certification of Hardship Withdrawals and Other Distribution Options (Optional)

Through SECURE 2.0, employers may choose to offer distribution options that allow participants, in times of need, access to retirement funds. Participants can self-certify their eligibility, which reduces employer liability and allows them to respect the privacy of employees facing adversity.

In addition to the hardship distribution option, the following new distribution options are available under SECURE 2.0, and employers may choose to adopt some or all immediately or at a later date:

• Withdrawals for emergency expenses up to $1,000
• Withdrawals for federally declared disasters
• Eligible distributions for domestic abuse victims
• Qualified birth or adoption distributions (QBADs)