When you’re still caught up working the job that you’re currently doing (among everything else), it can be hard to find a moment to think about retiring. Regardless of how close you may be to that well-earned milestone, retirement always feels like it’s never going to happen—or, at the very least, not going to happen anytime in the foreseeable future. This makes it much easier to skip planning for your future in favor of focusing on the things that are relevant in the present or the much more foreseeable future. This is only compounded if you’re a business owner as now not only are you caught up in planning your future, but you also want to provide your employees with the ability to plan theirs as well.
At Payday HCM, we understand this issue. We’ve had plenty of current and potential clients approach us with questions about how to navigate offering retirement plans to their employees. Oftentimes, the process can feel convoluted and overwhelming, especially when you factor in different regulatory and compliance requirements, much like the SECURE Act.
In this article, we’ll go into the different updates and changes you can expect to see in 2025 in regards to the SECURE Act 2.0. While the original SECURE Act was signed into law back in 2019, the updated version (signed into law back in 2022) contains a number of additions and revisions that weren’t set to take effect until later years, including 2025. We’ll dive into those changes here so that by the time you’ve finished reading, you’ll feel much more secure about yourself and your employees’ future.
In this article, you will learn:
- Expanded Contributions and Automatic Enrollment
- Automatic Escalation and Expanded Access for Part-Time Workers
- SECURE Act 2.0: Changes You May Have Missed And Those Still To Come
Expanded Contributions and Automatic Enrollment
Some of the bigger changes you can expect to see in regards to the SECURE Act 2.0 come in the form of automatic enrollment and plan expansion.
Automatic Enrollment and Plan Expansion
The biggest change businesses will see heading into 2025 is automatic enrollment, which will become mandatory for most new 401(k) and 403(b) plans. Eligible employees will automatically contribute between three percent and 10 percent of their pay. Employees can still opt out or adjust their contributions.
Exemptions exist for small businesses with fewer than 10 employees, new companies less than three years old, and certain church or governmental plans. Employers subject to this rule must ensure their systems are updated to support automatic enrollment and annual escalations. Communication with employees about these changes will be key to a smooth transition.
Higher Catch-Up Contributions for Older Workers
Starting in 2025, workers aged 60 to 63 can benefit from significantly increased catch-up contribution limits for 401(k), 403(b), and similar plans. These individuals can contribute the greater of $10,000 or 150 percent of the standard catch-up limit for those aged 50 and older. The amounts will be indexed for inflation, ensuring their relevance over time.
Looking ahead, in 2026, any catch-up contributions for those who earn more than $145,000 in a calendar year will need to be made on an after-tax, or Roth, basis. These are both in addition to the changes that allowed those 50 and older to contribute an additional $7,500 per year to their 401(k) starting in 2024.
Automatic Escalation and Expanded Access for Part-Time Workers
The new year will also see changes occur for part-time employees as well as changes to how employer contribution percentages change.
Automatic Escalation of Contribution Percentages
For plan years that are beginning after December 31, 2024, a new automatic escalation requirement of contribution percentages will apply. Contribution percentages will automatically increase on the first day of a plan year until the percentage reaches at least 10 percent of eligible wages but no more than 15 percent.
The same exemptions that applied for the automatic enrollment changes apply here, with small businesses with fewer than 10 employees, new companies less than three years old, and certain church or governmental plans all having exceptions.
Enhanced Access for Part-Time Workers
By 2025, part-time workers will find it easier to participate in employer-sponsored retirement plans. The SECURE 2.0 Act reduces the service requirement to two consecutive years of employment with at least 500 hours of work annually. Previously, part-time employees had to meet a three-year service requirement.
Educating part-time employees about their eligibility and the advantages of participating in retirement plans will be critical to achieving the intended outcomes of this change. However, this change does not apply to those participating in collectively bargained plans or to nonresident aliens.
SECURE Act 2.0: Changes You May Have Missed And Those Still To Come
Of course, these aren’t the only changes the SECURE Act 2.0 brought, and it’s possible some of them may have slipped (or still could slip) through the cracks.
Emergency Savings Accounts
Beginning in 2024, employers may offer emergency savings accounts linked to their retirement accounts that allow employees to save for emergencies. Contributions are capped at $2,500 and made on an after-tax basis, providing employees with a safety net without compromising retirement savings.
These accounts come with a list of rules and stipulations, including no withdrawal penalties, prohibiting employer contributions, automatic enrollment for employees with the option to opt-out, and transferring the account to another Roth upon termination. This is in addition to some additional exceptions for emergency withdrawals from a retirement account.
Student Loan Payments And Retirement Accounts
Beginning in 2024, employers would have the option of contributing to a retirement account on behalf of an employee who is repaying student loans instead of saving for retirement. The only stipulation here is employees may have to certify the amount that they have paid for their student loan repayments.
Besides this, these contributions would be subject to all the typical rules and regulations that apply to employer contributions to a retirement account.
Federal Saver’s Match
Starting in 2027, the current saver’s credit will be replaced with a saver’s match, a federal matching contribution of up to $2,000 for qualifying individuals. This match is designed for those with lower incomes to receive a federal contribution to their retirement account.
While this change is a bit further out, it highlights the government’s commitment to incentivizing retirement savings for low- and moderate-income earners. The federal contribution is equivalent to 50 percent of the employee’s contribution and will phase out as the employee’s income increases.
Here’s To Secure Retirement Planning In 2025
Retirement planning can be a stressful topic. Add on the added stress for business owners of offering a solid and comprehensive retirement plan for your organization, and the stress only multiplies. It’s easy to get lost in all the different terms and numbers, and that’s even before you start considering what sorts of things you have to do and what you can’t do under the different rules and regulations. The SECURE Act and the SECURE Act 2.0 are just another piece in the retirement puzzle that can make the whole thing feel too confusing. Luckily, with the information provided in this article, you’ll feel secure in knowing that you have what you need to make the best decision for you and your business moving forward.
Even still, keeping track of all the different updates and changes to your business’s benefits options doesn’t have to be a troublesome task. Take a look at the different national and local human capital management providers to find one that suits your business’s needs.
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