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SECURE Act 2.0: Small business owner guide and key retirement changes

SECURE Act 2.0 became law in 2022, and will affect small business owners and their 401(k)s and other retirement plans for the next several years. In particular, the legislation includes many provisions that will help small businesses and their employees save for retirement.

The act aims to go a long way in boosting employee satisfaction. Let’s explore the key changes you can expect to navigate—as well as new offerings you’ll be able to put in place in the coming years—but first, what is SECURE Act 2.0? 


What is SECURE Act 2.0? What was SECURE Act 1.0? 

SECURE Act 2.0 builds on the the Setting Every Community Up for Retirement Enhancement Act of 2019 (aka SECURE Act 1.0). SECURE Act 1.0 made a number of key changes to retirement savings, including providing a tax credit to small businesses that offer automatic enrollment in retirement plans and allowing long-term part-time employees to participate in retirement plans


SECURE Act 1.0 was a significant step forward in improving retirement security for Americans. However, there were still a number of challenges, such as the low participation rates in retirement plans among small businesses and low-income workers. 


SECURE Act 2.0 makes a number of additional changes to the retirement savings landscape to make it easier for small businesses to offer retirement plans to their employees. This is important because retirement savings can help employees save for their future, but it can also help attract and retain top talent.


Small businesses aren't legally required to offer retirement plans to their employees. SECURE Act 2.0 doesn't change that. Instead, it aims to simply make it easier to offer retirement plans.


Key SECURE Act 2.0 changes in 2023

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Many of the major changes will come in 2024 and beyond. But there’s one key change that could help you when deciding whether to establish a small business 401(k): the new retirement plan tax credits. Let’s look at that and other key SECURE Act 2.0 changes that took effect in 2023: 


Tax credits

As of 2023, businesses can also get a tax credit to help offset the cost of starting a retirement plan for employees. For example, if you set up a qualified retirement plan, such as a 401(k), you can qualify for a tax credit of $5,000 per year.


The credit will cover ‌‌100% of the administrative costs of setting up such a plan (for businesses with 50 or fewer employees). Businesses with 51-100 employees can still qualify for a tax credit that covers 50% of the administrative costs.


Small businesses can also qualify for a credit of $1,000 per employee for matching contributions as part of these new tax credits.


Roth option for matching contributions 

  • Optional for employers to offer 


Matching contributions are now available for Roth accounts. ‌Roth versions of retirement accounts allow you to make contributions on an after-tax basis. 


Before this, contributions by the employer on behalf of employees were only on a pretax basis. However, SECURE Act 2.0 will let companies offer the option of having employer matching on a pre-tax or after-tax (Roth) basis. 


RMD age

The SECURE Act 2.0 also includes changes to the required minimum distribution (RMD) rules for retirement plans, which will have implications for small business owners. For 2023, the new RMD rules increase the age at which individuals must begin taking RMDs to 73, up from 72. The ‌SECURE Act 2.0 RMD rule takes the RMD age to 75 in 2033.


This change will allow retirees to keep more money in their retirement accounts for a longer period, which can be especially beneficial for those who may outlive their retirement savings.


Key SECURE Act 2.0 changes coming in 2024

An illustration of the key changes for SECURE Act 2.0 for 2024, including: matching student loan payments, emergency savings accounts, starter 401(k)s, and penalty-free early withdrawals.

Student loan payment matching

  • Optional for employers to offer 

2024 will also bring the ‌new benefit of matching retirement contributions for student loan payments. Employees who typically have to forgo contributing to retirement accounts because of student loan repayments will still be able to take advantage of matching contributions.

That is, employee student loan repayments can qualify for matching contributions to retirement accounts. 

Employers will be able to contribute to an employee’s retirement account even if the employee isn’t contributing—and is instead making student loan payments. This could be a key employee benefit for certain businesses to offer. 


Emergency savings accounts

  • Optional for employers to offer 

Another new financial incentive to go live next year thanks to SECURE Act 2.0 will be the ability to offer emergency savings accounts as part of retirement plans. Employers will be able to create these savings accounts, and employees can make after-tax contributions to the accounts.

These emergency savings accounts will be eligible for Roth contributions. The balances in emergency accounts will also be eligible for distribution at least once a month—and withdrawals will be penalty-free.

Businesses can automatically enroll employees for these accounts but at no more than 3% of their salary. Contributions to the account will have a cap of $2,500. Contributions will also be eligible for matching contributions.


Starter 401(k)

As part of ‌SECURE Act 2.0, employers can offer a type of retirement savings plan called a starter 401(k) in 2024. This type of 401(k) is a simple and low-cost retirement savings option for small businesses.


Small businesses that don’t already offer a retirement plan can create a starter 401(k) under this new 401(k) rule. The benefit of the starter 401(k) is that it will be easier and less costly to run. There will be limits, however. In particular, employers won’t be able to make matching contributions, and the annual contribution limits will be the same as the IRA contribution limit.

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Early withdrawals

SECURE Act 2.0 also brings new changes to early withdrawals from retirement accounts. Starting in 2024, employees can make penalty-free withdrawals of up to $1,000 per year to cover emergency expenses. 


Key SECURE Act 2.0 changes in 2025

An illustration of the key changes for SECURE Act 2.0 for 2025, including: automatic enrollment, more eligibility for part-time employees, and higher catch-up contributions.

SECURE Act 2.0 continues the rollout of major retirement changes in 2025 and beyond. Major changes here will include the need to automatically enroll employees in retirement accounts, as well as the expansion of retirement offers to part-time employees. 


Automatic enrollment

  • Required provision for employers to follow

The biggest change in 2025 for small business retirement thanks to ‌SECURE Act 2.0 will be the expansion of automatic retirement plan enrollment for employees. Auto-enrollment is a key feature of many workplace retirement plans, which helps increase retirement savings participation.

Starting in 2025, employers will need to automatically enroll eligible workers into new retirement plans—in particular, those you create after Dec. 29, 2022. You’ll also need to set a minimum pre-tax contribution of at least 3% for their pay. Employee contributions will then need to increase by 1% a year until contributions equal 10%.


There's an exception to the automatic enrollment requirement for companies with 10 or fewer employees or for businesses that are less than three years old.


Part-time employee eligibility expansion

  • Required provision for employers to follow


Part-time employees, a key employee type that most small businesses utilize, will be able to take part in employer-offered retirement plans faster starting in 2025. Part-time ‌workers that log more than 500 hours a year for two years will be eligible, as well as part-time employees with one year of work and over 1,000 hours. 


Note that the SECURE Act 1.0 requirement, which was set in 2019, is three years of consecutive work. SECURE Act 2.0 makes it easier for part-time employees to qualify for retirement plans. 


Catch-up contributions  

Catch-up contributions are an important aspect of retirement planning that allows individuals over a certain age to contribute more to their retirement accounts. The SECURE Act 2.0 has catch-up contribution changes that allow you to increase your savings the closer you are to retirement age.

Catch-up contributions include money (beyond the standard contribution limits) that retirement account holders can put into their accounts. These extra contributions are generally for individuals age 50 years and older. However, for 2025 and beyond, employees 60-63 years old will be eligible for a $10,000 catch-up contribution.


Catch-up contributions for employees making over $145,000 a year will be on a Roth basis for 2023 and beyond.


Run your business with confidence

For small businesses, many of the provisions are optional, and the ones that are required, such as part-time employee eligibility and automatic enrollment, will be overseen by your retirement plan provider. 


Although offering retirement plans is not a requirement for small businesses with the passing of SECURE Act 2.0 and its new provisions, small business owners will be able to expand their own retirement savings and what they offer their employees. 


Owners that want to offer retirement plans without the optional provisions, such as student loan payment matching, can still do so with affordable 401(k) plans.

An illustration of the key changes for SECURE Act 2.0 for 2023, 2024, and 2025.

SECURE Act 2.0 FAQ


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