SECURE 2.0 Act of 2022

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was originally signed into law on December 20, 2019, to expand access to retirement savings and modernize retirement plan rules. It was later enhanced through SECURE 2.0, enacted on December 29, 2022.

While many of the provisions under SECURE 2.0 became effective and may have already been operationally adopted in earlier years, December 31, 2026 represents a key compliance deadline for plan sponsors to be aware of.

Plan Document Amendment Requirement

 

Although many SECURE 2.0 provisions may have already been operationally implemented to comply with the effective dates specificized in the regulations, plan sponsors are required to have formally adopted these changes into their written plan documents no later than December 31, 2026.

We encourage you to consult with your service provider that assists in maintaining your plan document and/or adoption agreement to ensure the required amendments are adopted by this date. 

Summary of Some Recently Effective SECURE 2.0 Provisions

 

Increased Cash-Out Limit

SECURE 2.0 increased the mandatory cash-out limit for small account balances to $7,000.  This means that when an employee terminates employment, employers may automatically distribute or roll over balances of $7,000 or less, rather than the previous $5,000 threshold.  This change is intended to simplify plan administration and reduce the number of small, inactive accounts.

 

Catch-Up Contributions and Roth Requirement

SECURE 2.0 introduced a significant change to catch-up contributions for higher-income earners.  Effective January 1, 2026, employees that are 50 years of age or older with FICA wages (Box 3 on Form W-2) of $150,000 or more in the preceding calendar year are now required to make any catch-up contributions as Roth (after-tax) contributions.  These contributions will be taxed in the year they are made but can be withdrawn tax-free in retirement, assuming requirements are met.  This FICA wage limit is indexed for inflation and may be adjusted in subsequent years.

 

Expanded Catch-Up Contributions (Ages 60–63)

Introduced “super catch-up” contributions whereby individuals between the ages of 60 and 63 are eligible for make additional catch-up contributions. For 2026, this enhanced limit is $11,250 compared to the usual catch-up amount for others of $8,000.  Standard and super catch-up limits are subject to future cost-of-living adjustments by the IRS in subsequent years.

 

Long-Term Part-Time (LTPT) Employee Eligibility

SECURE 2.0 expands retirement plan access for long-term part-time employees.  Under the updated regulations, employees who are at least 21 years of age and who work at least 500 hours per year for two consecutive years (reduced from three years under prior law) must be allowed to participate in the employer’s retirement plan for purposes of making elective deferrals.  Plan sponsors should make sure they are properly tracking this information and notifying employees of their eligibility, including considering any automatic enrollment provisions their plans may have in place have been adhered to.

 

Key Takeaways

 

We recommend plan sponsors ensure plan documents and/or adoption agreements have been formally amended by the deadline of December 31, 2026 to incorporate all the required provisions and any other optional provisions that have been previously adopted.  We also recommend plan sponsors review their current practices to ensure their plans are being administered in compliance with all the required provisions of SECURE 2.0 and also consider if any of the optional provisions available should be adopted.  

 

Taking proactive steps now can help avoid compliance issues and ensure retirement plans are taking advantage of the additional provisions available under the SECURE 2.0 Act of 2022.