With employee benefit plan audit season on the horizon, plan sponsors should prepare accordingly, as several provisions of the Setting Every Community Up for Retirement Act of 2022 (SECURE Act 2.0) went into effect beginning Jan. 1, 2025. 

Key Changes

Below is an overview of changes to be aware of to ensure your plans are in compliance with the SECURE Act 2.0 as well as with Employee Retirement Income Security Act of 1974 (ERISA). 

Automatic Enrollment

New 401(k) and 403(b) plans adopted after Dec. 29, 2022, must automatically enroll eligible participants, offering them an initial deferral percentage between 3% and 10% of compensation. Businesses or organizations exempt from this provision include: 

• Small businesses (10 or fewer employees)
• New businesses (in operation for less than three years)
• Church or governmental plans

Note, plan sponsors must escalate automatic contributions by least 1% annually until it reaches at least 10% (but no more than 15%), if not initially offered. Participants may opt out of automatic enrollment or escalation at any time.

Changes to Long-term, Part-Time Employees

The original SECURE Act passed in 2019 required employers to include long-term, part-time employees in their 401(k) plans, if they worked at least 500 hours per year for at least three consecutive years. 

The SECURE Act 2.0 shortened the eligibility service period to two consecutive 12-month periods for plan years beginning after Dec. 31, 2024, plus extended the long-term, part-time employee provision to 403(b) plans subject to ERISA. Keep in mind, employee service performed before Jan.1, 2021, is disregarded for both eligibility and vesting purposes, plus the employee must be at least 21 years old at the end of the required time period to qualify.

Increased Retirement Plan Contribution Limits

The annual contribution limit for employees who participate in 401(k), 403(b), government 457 plans and the federal government’s Thrift Savings Plan is increased to $23,500, up from $23,000. The catch-up contribution limit that generally applies for employees aged 50 and over remains $7,500 for 2025. 

Higher Catch-Up Contributions

Beginning Jan. 1, 2025, individuals between 60 to 63 years old can make higher-than-normal catch-up contributions. For 2025, the catch-up amount is $11,250 and will be indexed for inflation in future years. 

SIMPLE IRA plan participants were allowed catch-up contributions of up to $3,500, as indexed for inflation, prior to Jan. 1, 2025. However, there is an increase in the catch-up contribution limits based on the participant’s age for 2025 – for participants between the ages of 60 to 63, the contribution limit is increased to $5,250. The catch-up contribution remains $3,500 for participants between the ages 50 to 59 or older than 64.

Plan Ahead

Although SECURE 2.0 plan amendments are not due until Dec. 21, 2026, plan sponsors should work to ensure their plans are in accordance with changes already in effect. We encourage you to work with your benefit plan advisors to ensure compliance ahead of your 2025 audit. To learn more about employee benefit plan regulatory compliance or to obtain guidance, contact us today.