The SECURE 2.0 Act contains more than 90 provisions designed to enhance retirement savings opportunities and expand access to employer-sponsored retirement plans. While the law was enacted on December 29, 2022, general consensus amongst practitioners is that many of these provisions have not yet been widely adopted.

In this three-part series, we’ll explore key provisions and practical strategies to help employers make the most of the opportunities available under the SECURE 2.0 Act. Each installment will focus on a specific area: employers of younger and/or lower-income workers, nonprofit organizations, and small business tax credits.

Our goal is to offer insights that help organizations strengthen their retirement plans and better support their employees’ financial futures by fully leveraging the incentives available under the law.

First Up: Provisions to Consider If You Are an Employer of Younger and/or Lower Income Workers

Younger and lower-income workers often cite student debt and living expenses pressures as reasons they don’t save for retirement.  The SECURE 2.0 Act offers several ways to say for retirement while still retaining the able to access funds in case of an emergency.  Employers can choose to adopt these provisions as an way to incentivize employees to save without the risk of completely losing access their money.

Withdrawals for Certain Emergency Expenses

• • The 10% early distribution tax does not apply for certain distributions used for emergency expenses
  • Withdrawal amount may be up to $1,000
  • The distribution can be repaid within 3 years
  • Effective for distributions made after December 31, 2023

Withdrawal for Domestic Abuse

• • The 10% early distribution tax does not apply when retirement funds are needed to escape an unsafe situation
  • Withdrawal amount is the lesser of $10,000 or 50% of participant’s account balance.
  • The distribution can be repaid within 3 years
  • Effective for distributions made after December 31, 2023

For employees whose student debt prohibits them from saving, employers can adopt the student loan payments as elective deferrals provision.

Student loan payments as elective deferrals provision.

• • Employer can make matching contributions under a retirement plan with respect to employee’s qualified student loan payments.
  • Qualified student loan payments are limited to the 402(g) annual deferral limit for the year ($24,500 for 2026)
  • Employees must annually certified to the employer making the matching contribution that payments were made on the loan

Lower income employees currently contributing to your retirement plan can also benefit from a new federal matching contribution.

Saver’s Match

• • This is a federal matching contribution of 50% of the employee’s contributions up to a maximum of $2,000, deposited directly into the employee’s retirement plan. An employee is eligible for the credit if they are:
    • At least 18 years of age, not a full time student, not a nonresident alien and not claimed as a dependent on someone else’s tax return
    • Modified adjusted income on their tax return of less than $80,500 for married filing jointly and $40,250 for single taxpayers
    • Effective beginning with the 2027 tax year

If you are an employer looking to boost retirement plan participation, SECURE 2.0 Act now allows employers to offer deminimus financial incentives (such as gift cards) to encourage employees to enroll in workplace retirement plans!

We’re here to help. If you have questions on plan design, want a compliance checkup for your plan, or need guidance on tax implications for your business or plan participants, our experienced employee benefit plan advisory and tax team is here to assist.