SECURE Act 2.0: What Defined Contribution Plan Sponsors Need to Know

Please see our updated blog post on this topic here.

With SECURE Act 1.0 (officially titled “Setting Every Community Up for Retirement Enhancement Act”) still being implemented by many plan sponsors, Congress is now considering a new package of laws designed to help close the nation’s retirement savings gap, referred to as SECURE Act 2.0 (officially titled “Securing a Strong Retirement Act”).

While the House of Representatives’ Ways and Means Committee unanimously approved SECURE Act 2.0, it has still not been voted on by the full House, and certain representatives may want changes implemented. And it has likewise not been approved by the Senate. Thus while SECURE Act 2.0 appears to have bi-partisan support, passage in its current form is not a sure thing.

Below is a brief rundown of some of the highlights in SECURE Act 2.0 for defined contribution plan sponsors (again, provisions discussed below are subject to change):

  • Required Minimum Distribution Age Increase: SECURE Act 1.0 increased the age at which required minimum distributions (RMDs) must begin from 70.5 to 72 beginning in 2020. SECURE Act 2.0 would increase the RMD age to 73 beginning January 1, 2022, age 74 beginning January 1, 2029, and age 75 beginning January 1, 2032.
  • Increased Catch-Up Contributions: SECURE Act 2.0 would increase the contribution limit for catch-up contributions (currently $6,500 for those 50 or older) to $10,000 for those who are 62, 63, or 64 (returning to the $6,500 limit in the year an individual turns 65).
  • Catch-Up Contributions as Roth Only: Effective January 1, 2022, catch-up contributions would be Roth only.
  • Matching Contributions as Roth: Effective as of adoption, plan sponsors could opt to make matching contributions as Roth contributions.
  • Student Loan Matching Contributions: SECURE Act 2.0 would allow plans to treat student loan contributions as elective deferrals for purposes of providing a matching contribution under Code § 401(m). SECURE Act 2.0 also contains changes to non-discrimination testing that would ease implementation concerns for this type of benefit.
  • New Plans – Mandatory Automatic Enrollment and Automatic Increase: Applies only to new defined contribution plans (including both 401(k) and 403(b) plans) established after SECURE 2.0 is enacted. SECURE 2.0 requires new plans to automatically enroll participants between 3% and 10% of compensation and automatically increase their contributions by 1% until reaching at least 10% and not more than 15% of compensation. Exceptions apply to this requirement. SECURE Act 2.0 also codifies self-correction of automatic enrollment errors.
  • Speed up Participation of Long-Time Part-Time Workers in 401(k) Plans: SECURE Act 1.0 implemented a requirement that long-term part-time workers (anyone who worked 500 or more hours in the last three plan years, beginning with plan year 2021) be allowed to participate in the employer’s 401(k) plan. SECURE Act 2.0 shortens the required period to only two years working 500 or more hours.
  • Easier Plan Administration: SECURE Act 2.0 contains a number of provisions designed to ease administration of defined contribution plans. A few examples include: changes to benefit overpayment recovery requirements; reduction in excise taxes for failure to make RMDs from 50% to 25% (with further reduction if corrected in certain timeframes); and reduced notice requirement for unenrolled plan participants.
  • Creation of Lost and Found for Missing Participants: Within 3 years of the date of enactment, the Department of Labor, Treasury Department and Commerce Department will coordinate the creation of a searchable database for lost participant benefits.

The above points are just a few of the items in SECURE Act 2.0 and we will continue to publish more detailed alerts on specific topics as SECURE Act 2.0 gets closer to becoming enacted. If you have any questions, please reach out to your Faegre Drinker benefits counsel.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

About Author: Joshua Waldbeser

Joshua Waldbeser counsels retirement plan sponsors, asset managers and funds, and financial services providers on their fiduciary responsibilities under ERISA, and keeps them on course with regulatory compliance matters. Formerly with the Department of Labor (DOL) Employee Benefits Security Administration, Joshua has an insider’s view of the regulatory challenges faced by employers with respect to their own plans, and by insurance companies, investment advisers, broker-dealers, recordkeepers, banks and trust companies with respect to their services to plans and IRAs. He provides practical, business-oriented advice that reflects the interplay between ERISA, securities and other sources of law, and focuses on compliance and risk mitigation. View all posts by and

About Author: Mark Rosenfeld

An employee benefits lawyer, Mark Rosenfeld counsels employers, plan sponsors and administrators on the design, administration and governance of retirement plans (such as 401(k) plans) and welfare plans (such as health plans). He also drafts executive compensation arrangements, equity incentive plans and severance plans. Mark provides detailed analysis and advice on IRS Code § 280G golden parachute provisions in M&A transactions. View all posts by and

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