SECURE Act 2.0 Signed into Law by President Biden on 12/29. What Does that Mean for Me?

January 4, 2023

Update as of January 4, 2023

Most Americans don’t think that they will have enough money to retire. In fact, according to The Street, “75% of Americans don’t think they can save enough to retire.” That’s why, on December 29 the Secure Act 2.0 was signed into law. The new law will require employers with a 401(k) or 403(b) plan to automatically enroll their eligible employees in the retirement plan in 2025. Employees will have the option to opt out, but the auto-enrollment requirement, alone, will save new employees throughout the country an estimated $40.5B over a decade. The law will also require more opportunities for part-time employees to have access to retirement plans.

Here are just a few key points that are included in the SECURE Act 2.0:

  • Automatic enrollment plans will become effective starting on January 1, 2025. The default payroll deduction will be between 3% - 10% with an automatic percentage addition of 1% per year.  
  • Employers will be able to set up emergency saving accounts for their employees through payroll deductions.
  • This bill will expand coverage for part-time employees.

So, what does this mean?

For Americans, their workplace retirement savings will be more important than ever with this legislation.   

For employers, they still have a fiduciary obligation to employees regardless of the size of the plan and access to resources. If you are an employer that doesn’t know where to start or understand what this means for your business, we are here to help. Click here to learn more.  



Update as of July 15, 2022

On March 29, 2022, the House of Representatives passed H.R. 2954, the Securing a Strong Retirement Act, or the SECURE Act 2.0, with an overwhelming bipartisan vote of 414-5 to improve retirement savings plans. The bill has moved to the Senate for consideration.

TLDR: The House of Representatives has passed a bill that seeks to make improvements to the U.S. retirement system to support getting people to save more, improving the retirement rules and lowering costs for employers to set up retirement plans. The Senate has a similar bill that is in the works. If passed, the bill will head to the President for final approval. This is a small step for the retirement system and a giant leap for Americans who want to retire eventually.

Here’s what you need to know:

  • The bill builds on the Setting Every Community Up for Retirement Enhancement (SECURE Act 1.0) that was passed in 2019.
  • The goal of the bill is to get people to save more, improve the retirement rules and lower costs for employers to set up retirement plans.

  • The Senate has a similar version of this bill, the Retirement Security and Savings Act, in the works.

Big takeaways:

Many younger workers can’t afford to save for retirement because they are making monthly student loan payments. The SECURE Act 2.0 would help these workers who aren’t saving for retirement but want to.

For older Americans, the SECURE Act 2.0 would lighten some of the restrictions to help increase contributions for retirement savings.

Getting into the Details:

  • Requires employers to automatically enroll newly hired employees in retirement plans.
  • Increases catch up contributions, mandates that those contributions go into a Roth plan and that matching contributions for Roth plans be allowed.
  • Mandatory Required Minimum Distributions (RMDs) are delayed.
  • Beginning Jan. 1, 2023, part-time workers will be able to contribute to employer 401(k) plans sooner.
  • Student loan matching contributions will be classified in law and several improvements will be made.
  • A Retirement Savings Lost & Found Database will be created at the Department of Labor so workers and retirees can find accounts from former employers.
  • Small business that offers a retirement savings plan will be eligible for up-to-$1,000-per employee tax credit.
  • Expand the Employee Plans Compliance Resolution System (EPCRS) so more errors can be self-corrected.
  • Increase public awareness of the Saver’s Tax Credit, which is a retirement savings contributions credit available to low- and moderate-income employees.
  • Extend design features of 401(k) plans to 403(b) plans.
  • Eliminate barriers to investing in lifetime income annuities.
  • Allow nonprofits to offer defined contribution multiple-employer plans to their employees.

Before becoming a law, the differences in the House and Senate bills would need to be resolved. That being said, there is no certain timeline of when this bill might be enacted.

To sum it up, while the bill does not solve all the issues within the retirement system of the United States, it does make some big strides in the right direction. With a sweeping vote in Congress to pass this bill, the future of the retirement system looks bright.