Building Better Retirement Plans: Applying SECURE 2.0 Reforms

The SECURE 2.0 Act calls for many provisions that modify employer-sponsored retirement plans—but as a plan sponsor, do you know which provisions are right for your company? Signed into law on December 29, 2022, the SECURE 2.0 Act introduced a series of reforms to help Americans save for retirement and improve the flexibility of employer-sponsored retirement plans.

With many of the provisions already required, and other provisions optional, plan sponsors (employers) must take this updated legislation and apply it to the retirement plans they manage. Implementing these provisions, however, is not a simple task.

What SECURE 2.0 Provisions Are Employees Requesting?

As a retirement plan advisor providing guidance to retirement plan sponsors, we’ve had numerous discussions with our clients around SECURE 2.0 provisions. These are the current “hot topics” in our client meetings and our recommendations on how to approach them:

Student Loan Match

Plan sponsors love the idea of this feature, but some are waiting to see how it works out for other plan sponsors while others are waiting for their recordkeeper to roll out the functionality. That said, it’s valuable for committees to discuss this provision now and determine if it’s something they would like to add once their platform makes it available and it becomes more commonplace. This could become a competitive advantage when recruiting talent in the near future.

Employer Contributions Treated as Roth Contributions

Employees are directly requesting this feature from their plan sponsors. For plan participants who understand the benefit of Roth contributions, it’s a logical next step for them to ask that the employer contributions also be made as after-tax Roth contributions. While we wait for this feature to be offered on recordkeeper platforms, our interim solution is making sure the in-plan Roth conversion feature is available to participants. From there, we can educate employees on the ability to convert their employer matching source as well. The tax reporting structure already exists with all the major retirement plan providers for in-plan Roth conversions.

Increasing Catch-Up Contribution Limits for Individuals Aged 60–63

While this is optional, it seems like a no-brainer for many of our clients who want to make additional contributions possible for this population. We’ve encouraged clients to contact their payroll providers now to make certain they can accommodate this change with a recordkeeper in advance of the desired implementation timeline.

4 Steps for Implementing Retirement Plan Changes

When implementing changes to retirement plans, a methodical, data-informed approach helps you make effective decisions that align with your organization’s and employees’ needs.

We recommended this four-step process for implementing legislative updates and walk our clients through the process:

• Assess. Start with a comprehensive review of the current legislative landscape. Examine relevant regulations to determine which provisions are required, which are optional, the effective date for each provision, and your recordkeeper’s timeline for implementation on each item. Your retirement plan advisor can provide data about the implementation of key provisions across other recordkeeper platforms to ensure yours is on track.

• Strategize. Evaluate each provision based on your unique needs, considering your industry, employee population, and retirement program goals. Consider employee requests for specific plan features, the administrative work required to implement each provision, and any additional costs. These considerations help you determine which provisions to adopt to stay competitive and improve employee outcomes.

• Design. Collaborate closely with stakeholders, including your recordkeeper, to ensure accurate amendments to your plan document for the selected provisions. Benchmarking data on plan design, fees, and employer matching can help you assess how your plan compares to industry standards, informing decisions on which provisions to include.

• Implement. The retirement plan advisor should coordinate with your recordkeeper, payroll provider, and third-party administrators to ensure a smooth rollout of the updates. Regular fiduciary reviews and data analysis on plan performance can help you measure the impact of these changes. Reviewing “before” and “after” data allows you to determine whether the updates are meeting your goals, while providing insights to continue evolving your employees’ retirement program.

By following these steps, you can thoughtfully implement legislative changes, creating a retirement program that adapts to employee needs and industry shifts.

How Retirement Plan Advisors Can Help with the New Regulations

If you haven’t decided which SECURE 2.0 provisions to offer, you may find yourself in a position where your recordkeeper makes an urgent request to opt in or out of specific provisions within a short amount of time. Where do you turn when you’re asked to decide—quickly—as a fiduciary? To your retirement plan advisor, of course.

A retirement plan advisor, acting in a fiduciary capacity, provides advice and guidance to retirement plan sponsors on investment options as well as plan design. With an understanding of ERISA fiduciary best practices, many advisory teams also have in-house compliance experts to educate plan sponsors on legislative updates and how they might affect your retirement plan.