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Vedder Thinking | Articles SECURE Act 2.0 – The Second Wave


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The goal of the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act 1.0”) was to increase access to tax-advantaged accounts, create ease of administration and deductions for small businesses establishing new retirement plans, and ensure older Americans did not outlive their assets.  However, SECURE Act 1.0 came with unexpected complexities and did not staunch the retirement crisis on its own. It became clear over the two years following SECURE Act 1.0 that a second wave of legislation was required to continue building on the original goals of SECURE Act 1.0.

Similar to its predecessor, SECURE Act 2.0 was passed at the end of 2022 as part of an end-of-year appropriations bill.1 Its goals are similar to those of SECURE Act 1.0:  (1) increase participation in retirement plans generally; (2) improve retirement rules; and (3) lower the costs for employers setting up new retirement plans. Below, we discuss some of the highlights of SECURE Act 2.0.  While we expect further regulations/guidance on certain provisions (e.g., Roth employer contribution election and required distributions), SECURE Act 2.0 presents plan sponsors with certain plan design opportunities.  Plan sponsors should work with their administrators and counsel to determine whether to adopt certain changes and how to communicate such changes to participants.

Should you have any questions on the sections discussed below or any provision not mentioned, please contact Chris Collins at, Phil Mowery at or Amal Rafiq at

Roth Treatment of Employer Contributions 

Effective immediately, employer sponsored retirement plans may permit employees to elect that all employer matching contributions and other employer nondiscretionary contributions be made as Roth contributions.  Such contributions are made on an after-tax basis so the participant’s income will include the contributions.  Further guidance is expected on this provision as the tax withholding issues are unclear. 

EPCRS – Corrections and Overpayments

Previously, in the event of an overpayment made to a participant, a plan fiduciary was obligated to notify participants of the overpayment and attempt to recover the overpayments.  Effective immediately, SECURE Act 2.0 clarifies that fiduciaries are not required to recover “inadvertent overpayments,” and may exercise discretion in seeking recovery of overpayments.  While this is a welcome change, fiduciaries should note that this provision only applies in certain types of plans and circumstances, and may require a plan amendment to satisfy the requirements of the Internal Revenue Code.

SECURE Act 2.0 also expands the Employee Plans Compliance Resolution System (“EPCRS”), to cover inadvertent overpayments without submitting an application to the IRS.  Plan sponsors can now utilize EPCRS to self-correct inadvertent errors so long as the correction occurs within a reasonable time after the error is discovered.  SECURE Act 2.0 instructs the IRS to revise EPCRS to cover these and other changes.

Required Minimum Distribution Delay 

In 2020, SECURE Act 1.0 raised the required minimum distribution (“RMD”) age from 70½ to 72 years old.  SECURE Act 2.0 raises the RMD to age 73 for individuals turning 72 after December 31, 2022, and eventually to age 75 in 2033. Additionally, the penalty for failure to take an RMD is reduced from 50% to 25%, and if corrected in a timely manner, the penalty is further reduced to 10%.

Hardship Self-Certification

Effective immediately, plan sponsors may accept a participant’s self-certification of (i) a hardship or event if such distributions are permitted under a 401(k) or 403(b) plan (more on the availability of hardship distributions for 403(b) plans below); or (ii) an unforeseeable emergency distribution from 457(b) government plans. 

Additionally, SECURE Act 2.0 permits 403(b) plans to allow hardship distributions under the same rules as 401(k) plans. This provision is effective December 31, 2023.

Increase of Cash-Out Limit 

Effective 2024, an employer-sponsored retirement plan may pay a lump sum of the balance of a terminated participant’s account without their consent if the account balance is $7,000 or less. This is an increase from the prior threshold of $5,000. 

Student Loan Repayments as a Basis for Matching Contributions

SECURE Act 2.0 permits employers to use employees’ qualified student loan repayments as a basis for matching contributions. This change codifies an IRS private letter ruling, which permitted an employer to make matching contributions for employees who were paying off their student loans by matching the amount the employee was paying on their student loans every month.  Plan sponsors may begin adding this election for plan years beginning after December 31, 2023. 

Emergency Savings Accounts and Withdrawals 

Employee retirement plans and other defined contribution plans may add an emergency savings account as a designated Roth account. Participation is limited to non-highly compensated employees. Although withdrawals from this account are penalty free, the balance of the account cannot exceed $2,500. Employer contributions are not permitted. Emergency savings accounts may be set up on or after January 1, 2024. 

Under SECURE Act 2.0, beginning in 2024, certain distributions for personal emergency expenses will not be subject to the 10% penalty tax for early distributions. The withdrawal is limited to $1,000 per year and the participant will have the option to repay the distribution over three years. The employer is permitted to rely on an employee’s written certification of the qualifying personal emergency expense. Further guidance is expected on this exception. 

Increased Catch-Up Contributions

Catch-up contributions are increased under SECURE Act 2.0 with varying effective dates. For taxable years beginning on or after January 1, 2024, the $1,000 catch-up contribution for participants age 50 and over is indexed pursuant to the IRS cost-of-living-adjustment. Additionally, catch-up contributions for employers who make more than $145,000 per year are required to be Roth dollars. Beginning in 2025, catch-up limits for participants age 60 to 63 and participating in 401(k), 403(b) and 457 plans generally increase to $10,000. For employees with fewer than 100 employees, the annual deferral limit for catch-up contributions is increased depending on the number of employees and the other features of the plan. 

Automatic Enrollment 

The automatic enrollment feature has been a prevalent option in retirement plans for several years. SECURE Act 2.0 makes automatic enrollments a requirement rather than an option for new plans.  For plan sponsors of new 401(k) or 403(b) plans starting in 2025, automatic enrollments will be required with a participation amount of at least 3%, and a required auto-escalation feature of 1% each year. This requirement will not impact the ability of participants to opt out of enrollment or automatic escalation. Small businesses with 10 or fewer employees, church plans and government plans are exempt from this requirement. 

Expanded Eligibility for Long-Term, Part-Time Employees

Effective 2025, employees who work between 500 and 999 hours each year for two consecutive years (where previously the time period was the preceding three years) must be eligible to participate in an employer-sponsored retirement plan.  This provision expands on a similar provision in SECURE Act 1.0.

Plan Amendments

Plan amendments for SECURE Act 2.0 provisions are required to be adopted before the last day of the plan year on or after January 1, 2025 (i.e., December 31, 2025 for calendar year plans).


(1) The hasty process appears to have included an inadvertent error that eliminates catch-up contributions beginning in 2024.  Congress will rectify this error through a technical correction.


Christopher T. Collins


Amal Rafiq