New SECURE Act provisions bring changes, opportunities to employer retirement plans

The SECURE Act, originally passed in 2019, has seen its provisions roll out and take effect in the years since. With the last of its provisions becoming law in 2025, employers should be aware of, and will need to adjust to, the most recent changes.

“With the recognition that Social Security would not fully cover retirees’ income in the future, the SECURE Act was developed to help people save money,” says Sheri Terens, CPA, Director at Corrigan Krause. “It does this by encouraging small business retirement plans through provisions that reduce employer costs and expand employee access.”

Employers will need to understand the impact of the Act’s mandatory requirements, such as mandating that long-term, part-time employees are included in the plan, which is a huge change for employers, and the start of automatic enrollment requirements. But employers will also need to decide what optional opportunities the Act offers that they’ll incorporate, and then work with their accountant to understand the tax incentives to offset the costs that are involved with it.

Smart Business spoke with Terens about the SECURE Act, its most recent provisions to take effect, and what employers need to do because of it.

What changes should employers expect to their retirement plans in 2025?

One of the more significant updates to the Act this year is that newly formed plans have automatic enrollment, meaning new employees are automatically enrolled in the company’s retirement plan as soon as they’re eligible — at least at 3 percent, but no more than 10 percent, of their pay. If an employee does not wish to be part of their employer’s plan, they must elect to opt out. Often employees don’t opt out, which is ultimately good for them as the contribution in some cases doesn’t affect their net paycheck.

There’s also automatic contribution escalation with automatic enrollments. Every year on an anniversary date, whether it’s the employee’s hire date or a certain date determined by the company in the calendar year, the plan contribution increases up to 1 percent.

Something else new is optional student loan matching. Individuals coming out of college often prioritize paying student loan debt over participating in the retirement plan. With this, the employer can make an election to match whatever is being paid on student loan debt into the employee’s retirement plan — so, if the employee makes monthly $200 student loan payments, the employer could elect to consider that an employee contribution and contribute what would effectively be the employer match on that amount.

There’s also the new catch-up provision for those over the age of 50, allowing for an additional $7,500 in contributions in addition to the original deferral that will be indexed annually for inflation.

Changes have been made to make it easier to take hardship withdrawals out of retirement plans. Employees can contribute $2,500 to an emergency account in their retirement plan, and they can take the money out penalty free.

Further, the long-term part-time employee expansion for those who work at least 500 hours in two years must be included in the company’s plan.

And for employers, the Act introduces starter 401(k) plans with fewer administrative costs and fewer regulations to make it easier for small businesses to start a plan.

How can employers get the most out of their plans given these changes?

To get a handle on these changes, employers should meet with their service providers, investment advisers, their retirement plan record keepers and third-party administrators and review their plan documents to understand which changes are mandatory and how they’ll affect the business. Then explore the optional changes and determine if adding them make sense for the company.

This Act was originally signed into law by the current administration and both parties are in favor of these enhancements, so major changes or a repeal are not foreseen. Employers, then, need to be aware of what has happened and what’s coming up. Talk with advisers and make sure the company is doing everything it needs to in order to be in compliance. ●

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