9 notable provisions from the SECURE 2.0 Act of 2022


On December 29, 2022, President Joe Biden signed the Consolidated Appropriations Act of 2023 into law. At over 4,000 pages, the Act included the SECURE 2.0 Act of 2022 (SECURE 2.0), a sprawling collection of 92 retirement plan-related provisions that build on the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE ‘19). There are changes intended to encourage plan-sponsorship and provide additional opportunities to save, changes that (in practical terms) will increase and others that will (hopefully) reduce administrative burdens, and changes that raise revenue. Some changes are effective immediately, some in the next few years, and others that will not take effect for many years (if ever).

This article is not intended to be a comprehensive summary or explanation of every provisions of SECURE 2.0. Instead, it is intended to highlight and provide perspective on provisions that may be of interest to employers.

Expanded Automatic Enrollment (Act § 101)

Effective: Plan years starting after December 31, 2024


  • 401(k) and 403(b) plans established after December 28, 2022: Must automatically enroll participants upon becoming eligible. The initial default deferral rate must be at least 3% and not more than 10% and must auto-escalate by at least 1% per year up to a maximum of at least 10% but not more than 15%. Plans must permit withdrawal of initial automatic contributions within 90 days of the first automatic contribution (potentially mitigating the burden of small account balances). 
  • 401(k) and 403(b) plans established before December 29, 2022: Exempt (but first joining a pre-existing existing multiple employer plan (MEP) after December 28, 2022, does not avoid the obligations).

    Exceptions exist for church and government plans. Also, automatic enrollment is not required for the first three years a new business is in business or for at least one year after a business first has more than 10 employees.

Comments: Exempting existing plans means many employers will preserve their ability to decide whether or not to add automatic enrollment and to avoid the administrative burden and cost of adding this feature. For most employers creating new plans, this will be “baked-in” and will need to be part of implementation and routine administration. It may, however, lead to increased administrative costs. Employers will also have to take expanded participation and contribution rates into account when deciding about matching contributions. 

Saver’s Match (Act § 103)

Effective: Tax years starting after December 31, 2026

Highlights: The current Saver’s Credit is a non-refundable tax credit available to certain taxpayers who make contributions to a 401(k) plan or IRA. This is replaced with a federal matching contribution to be deposited in the taxpayer’s IRA or 401(k) plan (and presumably allocated exclusively to that taxpayer’s account). The match is 50% of contributions up to a maximum of $2,000 per person and phases out based on income.

Comments: Conceptually, this provision makes sense. If the idea behind the Saver’s Credit is to encourage retirement savings, it makes sense for the amount of the credit to be automatically directed into the retirement account. How this will actually work remains to be seen. The law does not include any provisions explaining how this will actually work beyond stating that it “shall be payable by the Secretary [of Treasury] to the applicable retirement savings vehicle.” In addition, the law allows employer plans to choose whether or not to accept the Saver’s Credit matching contribution and administrative complexity may discourage employers from enabling plans to accept it.

Deferral of tax upon sale of S corporation stock to an ESOP (Act § 114)

Effective: Stock sales after December 31, 2027

Highlights: Currently, a shareholder who sells non-publicly traded stock in a C-corporation to an ESOP can defer recognition of gain on the sale, provided various statutory requirements are met. The new law will allow deferral of gain on sales of stock in an S-corporation to an ESOP, with the amount deferred limited to 10% of the amount realized on the sale.

Comments: This is intended as a step toward treating S corporations more like C corporations, at least as to sales to an ESOP.  Because this would appear to be a tax expenditure and does not take effect for 5 years, it may be vulnerable to repeal.  If, however, this survives the next 5 years, it should tend to encourage ESOP formation and the use of ESOPs as a shareholder exit strategy. 

Emergency expense withdrawals (Act § 115) | Emergency savings accounts (Act § 127)

Effective: Distributions/plan years after December, 31, 2023


  • Emergency expense withdrawals: One withdrawal per year for emergency expenses (“unforeseeable or immediate financial needs relating to personal or family emergency expenses”) of up to $1,000 will be exempt from 10% additional tax for early withdrawals. May be repaid within 3 years and no emergency expense withdrawals during 3-year period unless prior withdrawal repaid.
  • Plan-linked emergency savings accounts (“ESA”): Employers will be permitted (but not required) to add emergency savings accounts to their individual account retirement plans, e.g., 401(k) plans. Only non-highly compensated employees may be eligible and only post-tax, e.g., Roth, contributions can be contributed to an ESA. Contributions cannot exceed $2,500 (or lower as set by the employer) and eligible employees can be automatically enrolled with a deferral rate not exceeding 3%. The ESA must allow withdrawals at least once per month and, each year, the first four withdrawals must not be subject to any fees or charges. The provisions allows the plan sponsor to determine how the ESA will be invested from among several options described in the statute.

Comments: Treasury and Labor department guidance will be needed to answer operational questions so implementing these features in 2024 might not be practically feasible. That said, employers interested in implementing either or both of these provisions should speak with their plan recordkeeper or third-party administrator as new procedures and system changes would likely be required. 

Age increase for required minimum distributions (RMD) (Act § 107)

Effective: For distributions made after December 31, 2022

Highlights: Increases RMD age from 72 (per SECURE ’19) to 73 and eventually, to 75. More specifically, the RMD age will increase to 73 for individuals who attain age 72 after December 31, 2022, and to age 75 for individuals who attain age 74 after December 31, 2032.

Comments: Employers should speak with their plan recordkeepers/third-party administrators about implementing this change and communicating with participants who will have their RMDs commence later than previously expected.

Increase in catch-up contribution limit (Act § 109) | Catch-up contributions Roth requirement (Act § 604)

Effective: Increased limit - Tax years beginning after December 31, 2024. Catch-up contribution Roth requirement - Tax years beginning after December 31, 2023


  • Increased catch-up contribution limit: For plans other than SIMPLE Plans, the catch-up contribution limit for participants aged 60 – 63 will increase to the greater of $10,000 or 150% of the regular catch-up limit for 2024. For SIMPLE Plans, the limit will become the greater of $5,000 or 150% of the regular limit for 2025. 
  • Catch-up contribution Roth requirement: Catch-up contributions, regardless of age or amount, will have to be made on a Roth basis (post-tax) unless the participant’s prior year compensation did not exceed $145,000 (in which case the participant can chose between pre-tax and Roth).


  • Increased catch-up limit: This additional savings opportunity for older participants will require some changes to payroll and administrative procedures but there is time to implement with care.
  • Roth requirement: Some are predicting postponement of when this must be implemented but unless and until further developments, employers should not wait to begin determining what systems and procedural changes will be necessary to implement this in 2024. Note that, once this requirement becomes effective, a plan must allow Roth contributions in order for any participant to make catch-up contributions.

Matching contributions on student loan repayments (Act § 110) 

Effective: Plan years beginning after December 31, 2023

Highlights:  An employer may (but is not required to) treat “qualified student loan payments” as an elective deferral/elective contribution for calculating employer matching contributions to, for example, a 401(k) plan based on student loan payments. These contributions would be treated as a matching contribution under 401(k)/401(m) safe harbor designs. 

Comments: Fortunately, the statute provides for annual certification by the employee as to student loan payment. That said, implementing this feature will require changes to administrative systems and procedures and the complexity should not be underestimated.

Long-term part-time workers (Act § 125)

Effective: Plan years beginning after December 31, 2024

Highlights: SECURE ’19 established new minimum eligibility rule applicable to long-term part-time workers, namely, eligibility after 3 consecutive years in which the worker completes at least 500 hours of service (versus 1 year with at least 1,000 hours of service). SECURE 2.0 reduces the requirement to 2 consecutive years (retaining the 500 hours of service per year requirement). For vesting purposes, service prior to January 1, 2023, is not taken into account. 

Comments: Although SECURE 2.0 reduces the eligibility period by one year, it also effectively pushes off the first year that a long-term part-time employee may meet this new eligibility rule until January 1, 2025. That said, system and process changes made to satisfy the SECURE ’19 requirement must be revised in light of the shortened time eligibility period and the complexity of doing so should not be underestimated. 

Increase in mandatory cash-out limit (Act § 304)

Effective: Distributions after December 31, 2023

Highlights: For over 20 years, plans could distribute a defined contribution account without the participant’s consent if the balance did not exceed $5,000. SECURE 2.0 increases this limit to $7,000.

Comments: Employers that want to implement this for 2024 should speak with their recordkeeper/third-party administrator 

There are many other provisions intended to encourage the establishment of new plans and increase participation and savings by participants, such as:

  • Tax credits for establishing a new plan
  • The creation of new “starter” 401(k) and 403(b) plans
  • Creation of 403(b) pooled employer plans
  • Allowing employers to offer de minimis financial incentives to save
  • Increases in SIMPLE Plan limits. 

Additional and optional plan design related provisions include:

  • Allowing participants to elect to receive match or nonelective contributions as Roth contributions.
  • Allowing hardship distributions for qualified disaster recovery, for terminally ill employees, and victims of domestic abuse.

Finally, there are numerous provisions intended to simplify administration, such as:

  • New limits on the recovery of overpaid benefits from participants and circumstances where recovery is not required
  • Reporting to “Retirement Savings Lost and Found”
  • Expansion of self-correction of operational failures
  • Self-certification of hardship distribution requirements
  • Safe harbor for correcting automatic enrollment and increase failures
  • Reform of the family stock ownership attribution rules
  • Directing Treasury, Labor, and the PBGC to make recommendations as to simplification of current reporting and disclosure requirements  
  • Eliminating the requirement of providing certain notices to unenrolled participants. 

There is sure to be much guidance coming from Treasury and Labor. Our Tax and Benefits attorneys will keep you apprised of major developments.

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