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 our 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.

Next Up: Provisions Specific to Nonprofit Organizations

Many nonprofits cite the financial cost of sponsoring a retirement plan and the administrative burden of managing it as key reasons they do not offer one. The SECURE 2.0 Act provides opportunities for nonprofits to reduce both costs and administrative complexity.

Multiple Employer 403(b) Plans (MEP)

• A Multiple Employer Plan (MEP) allows smaller nonprofits to join together in a single retirement plan, helping them obtain more favorable investment options and reduce administrative costs through shared plan management.
• Includes relief for “one bad apple”- meaning if one participating employer in the group violates terms of the plan, it does not jeopardize the tax-qualified status of the entire plan for other compliant employers.
• Effective for plan years beginning after December 31, 2022

Automatic Enrollment Requirements

If you are a nonprofit considering sponsoring a 403(b) plan, be aware that all new plans established after December 29, 2022 must include automatic enrollment beginning with the first plan year starting on or after January 1, 2025.

• Beginning in 2025, the automatic deferral percentage must be at least 3% and no more than 10% of compensation. Each year thereafter the percentage must automatically increase until it reaches at least 10% but not more than 15% compensation.
• Employees who do not wish not to participate must be permitted to withdraw their contributions within 90 days of their first automatic contribution.

General Enhancement to 403(b) Plans

If your nonprofit already sponsors a 403(b) plan, SECURE 2.0 Act also includes several enhancements that may improve your plan design.

• 403b plans can now access collective investment trusts (CITs) as plan investment options which often have lower costs than annuity contracts or publicly traded mutual funds.
• Effective December 29, 2022

Part-Time Worker Eligibility Expansion

• Part-time employees must be allowed to make elective deferrals if they work at least 500 hours in two consecutive years.
• Hours worked in 2023 and 2024 determined eligibility in 2025; hours in 2024 and 2025 will be used to determine eligibility in 2026, and so on.
• Long-term part-time employees must be permitted to make salary deferrals although employers are not required to provide matching or nonelective contributions for these employees.

Qualified ABLE Programs

For nonprofits serving individuals with disabilities or their families, SECURE 2.0 Act also expanded eligibility for Qualified ABLE programs.

Age Requirements for Qualified ABLE Programs

• The age by which blindness or disability must occur increased to age 46, up from age 26.
• Effective for taxable years beginning after December 31, 2025.
• Contributions to the account cannot exceed the annual gift-tax exclusion ($17,000 for 2026)
• Beneficiaries who are employed may also contribute additional amounts under the ABLE to Work provision.
• Contributions grow tax-free and funds can be used tax-free for qualified disability expenses

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.