How SECURE 2.0 Provisions Can Alter Employer Strategies for 2025, 2026

As plan sponsors continue implementing the required provisions of the SECURE 2.0 Act of 2022, they are shifting their focus to some of the optional provisions. There is significant interest in the enhanced catch-up contributions for participants aged 60 through 63 and the student loan repayment match.

Plan sponsors are also preparing for the 2026 requirement that high-earning participants make their catch-up contributions to a Roth account. Some are giving participants the option to receive the employer match as a Roth contribution rather than a pre-tax contribution. Each of these changes involves administrative complexities.

There are several key issues to consider when deciding whether to implement these changes and whether to change employer contribution strategies.

Age 60-63 Catch-Up Contributions

SECURE 2.0 gives plans the option to let participants ages 60 through 63 make extra catch-up contributions starting in 2025—adding $11,250 to the standard $23,500 contribution next year. (Other participants 50 and older can still make regular catch-up contributions of $7,500 in 2025.)

“Plan sponsors are not required to offer the super catch-ups, but in our experience, the vast majority of them have indicated they will offer them, and many of them have done the work to start doing that,” says Kirsten Hunter Peterson, vice president of workplace thought leadership at Fidelity Investments. “We recently did a survey, and this was the No. 1 discretionary provision of SECURE 2.0 that they wanted to offer.”

The Beck Group, a construction and architecture firm based in Dallas, and a 2024 PLANSPONSOR Plan Sponsor of the Year winner as HCBeck Ltd., scrambled to offer super catch-up contributions for 2025.

“We were kind of at the buzzer in making the decision about whether we were going to implement it for 2025,” says Elizabeth Haynie, a senior manager of benefits and well-being for the Beck Group. “We had a lot of meetings with our system administrators and payroll managers, and we did reach a consensus that we could change our configuration and make sure we were doing that accurately. Aside from the mechanics of it, it was an easy decision for us to make sure folks are saving as much as they can.”

The decision can be more complicated—and costly—for plans that match catch-up contributions, says Adam Tremper, a director of offer management for T. Rowe Price. He says 84% of their institutional clients are adopting the super catch-up in 2025, but some of the 16% that are not changing yet are plans that match catch-up contributions.

“That creates a different level of decision and discussion at the employer: Rather than a simple benefit to turn on or not, it becomes a treasury question,” he says. Those plan sponsors are studying how much the super catch-up could cost them in match money before deciding how to offer it. “Some could elect to only match catch-up contributions up to certain limits. Some may not match the expanded catch-up.”

Depending on the calculations, it may be rare for the super catch-ups to affect employer contributions, except for some of the highest-paid employees or for plans with incredibly generous match rates, says Matthew Hawes, a partner in the employee benefits and executive compensation practice at Morgan, Lewis & Bockius LLP.

Roth Catch-Up Requirement for High Earners

SECURE 2.0 requires participants aged at least 50 who earned at least $145,000 in wages in the previous year to make their catch-up contributions to a Roth, rather than a pre-tax, account. This provision applies to all catch-up contributions, not just super catch-ups. It was originally scheduled to take effect in 2024 but has been delayed until 2026 to give plans more time to implement the change.

The Beck Group “put that on the back burner” while focusing on getting super catch-ups ready for 2025, says Haynie. In addition to making sure the systems are in place for the new requirement by 2026, she also wants to provide education about the long-term benefits of after-tax Roth contributions.

“We want to create an outreach campaign leading up to 1/1/26 to folks that have a salary that would potentially be impacted,” says Haynie.

She also considers this a good opportunity to engage the financial consultant Beck Group offers as part of the company’s financial wellness program to host information sessions and one-on-one discussions with employees.

Roth Employer Contributions

The Roth 401(k) catch-up requirement does not specifically affect employer contributions. But some plans are implementing the change in tandem with an optional provision of SECURE 2.0: Roth employer contributions.

Employer contributions are typically pre-tax, but plans can now give participants the option to receive their match as an after-tax contribution to a Roth.

Administering this provision can be complicated, because the employer contributions become taxable income, and it was unclear whether they would be reported to the IRS on a W-2 or 1099 tax form. The IRS issued guidance in December specifying that plan participants who choose to have matching contributions made to a Roth account, rather than pre-tax, will receive a 1099 reporting that income.

“Once we got that clarity, we could begin service and roll out to plan sponsors,” Tremper says. “Sponsors are effectively able to maintain existing payroll processes and shift the burden of tracking the taxable amounts and generating the associated tax reporting, the 1099, to recordkeepers.”

T. Rowe Price currently has about 80 plans scheduled to adopt the Roth match in January 2025, and several others are interested in implementing it later in the year, he says.

Student Loan Repayment Match

The biggest SECURE 2.0 change affecting employer contributions now is the option to count student loan repayments as employees’ retirement plan contributions when determining the match. The Beck Group is hoping to implement that provision within the next year.

“We definitely have thought about the recruiting potential of being able to offer something like this, because we know it is such a concern for employees coming right out of school,” Haynie says. “People who may be five to 10 years into their loan may also benefit.”

The Beck Group will continue to match 100% of employee contributions up to 6% of income and automatically enroll participants at 6% to receive the full match. But if someone decreases their deferral to less than the 6% maximum and instead uses that money to pay back eligible student loans, they will still qualify for the full match.

“The reason why we liked that vs. just giving them money toward loan repayment is: This keeps them engaged in retirement savings,” Haynie says.

The IRS issued guidance in August specifying that student loans in an employee’s name used for their education, their spouse’s education or their dependents’ education can qualify. The guidance also specified that the loan repayment could be self-certified, but plan sponsors still have questions.

“People are confused about whether they need a vendor to help with this, how much are they charging, and is it worth it?” says Elizabeth Dold, a principal in Groom Law Group.

“This is real money that employers wouldn’t otherwise be shelling out unless it’s legitimate,” she says. “I think many of the employers are more comfortable working with a vendor that can do some due diligence to make it streamlined.”