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Benefits February 3, 2025
Plan Sponsors Move Forward (Slowly) With SECURE 2.0 Provisions
While catch-up contributions and cash-out thresholds have been adopted widely, take-up is more ponderous for student loan matching and emergency withdrawal flexibility.
Reported by Beth Braverman
Art by David Plunkert
More than two years after the passage of the sweeping SECURE 2.0 Act of 2022, plan sponsors are still talking about many of the optional provisions—and implementing some of them.
“It has a long tail, and there are provisions that go into effect—or elements of provisions that go into effect—all the way through 2032,” says Barbara Rayll, vice president of products and solutions management at Corebridge Financial. “I think we’re really just starting to see the meat of some of these provisions come into play.”
Rob Massa, a managing director at Prime Capital Financial, said plan sponsors have found that some provisions are relatively easy to implement within the current plan infrastructure. He points to the higher catch-up contributions for participants aged 60 through 63, which are mandatory for plans that already allow catch-ups, as an example.
That provision, along with the increase in the age at which required minimum distributions must be taken, have a near-immediate, positive impact on affected employees, says Mike Webb, a senior manager in the retirement plan consulting group at CAPTRUST. When it comes to the age at which RMDs must be taken, which increased to age 73 in 2023 from age 72 and will go up to age 75 in 2033, there are benefits to employers as well.
“The [fewer] RMDs they have to deal with the better,” Webb says. “Seniors never understand them, and it’s just a difficult, cumbersome rule all around.”
Focus on Withdrawals
Another popular provision among plan sponsors is self-certification of hardship withdrawals, which some sponsors like because it both reduces their liability and allows them to respect the privacy of employees facing adversity.
Many plan sponsors have made other changes to their withdrawal provisions, taking advantage of SECURE 2.0 provisions that allow for withdrawals related to natural disasters and emergency expenses and for distributions for domestic abuse survivors. Such provisions were all among the optional provisions that plan sponsors told Fidelity they were most likely to adopt in a survey last year.
“A lot of those are the distribution options that are allowing participants, in times of need, to access retirement funds, when pre-SECURE 2.0, those wouldn’t have been opportunities,” says Molly Beer, the defined contribution consulting practice leader at Gallagher.
That said, it is too early to say whether plan participants are taking advantage of such provisions or whether having those options available is motivating participants to increase the amount they are saving in workplace retirement plans. In addition, some plans are hesitant to enact provisions that could potentially increase plan leakage.
“I’ve been on calls talking about the [emergency withdrawal provisions], and they’re like, ‘Why would we give people more access to their retirement funds?’” says Julia Zuckerman, a vice president and senior consultant with the Segal Group. “We want to encourage them to keep the money in there.”
Slower Uptake for More Complicated Provisions
When it comes to more complicated optional provisions, such as in-plan emergency savings accounts and employer matching of student loan repayments, however, uptake among plan sponsors has occurred more slowly.
“To add those, plan sponsors need more clarification on how it will actually work and the potential risks if they’re not administered correctly,” Beer says.
Only 1% of employers have adopted a Roth sidecar savings account for employees, and just 5% have put the student loan matching provision in place, according to Alight’s “2025 Hot Topics in Retirement and Wellbeing” report. The lower adoption makes sense, Webb says, as many plan sponsors focus their efforts on keeping up with new, mandatory rules before moving onto the optional provisions.
Still, more than 40% of plan sponsors said they were at least moderately likely to implement the student loan matching provision in their plan going forward, according to Alight. Experts say interest in that option depends heavily on the demographics of employers.
“I have had one client that was super excited about that provision, because they have a highly educated workforce with a lot of junior people and a ton of debt,” Zuckerman says. “That was very attractive for them, and it has been a well-utilized program in its first year.”
Pharmacy chain Walgreens in 2024 announced that it would offer the student loan repayment matching contribution benefit to the more than 276,000 participants in its 401(k) plan, starting this year.
Sparking Conversation
Even employers that have opted not to implement the SECURE 2.0 optional provisions are having in-depth discussions about concepts like student loan repayment and emergency savings, with some deciding that out-of-plan solutions are best for their populations. The fact that such dialogues are happening more frequently is a win for the industry, Massa says.
Looking ahead, experts expect plan sponsors to start working through some more complicated provisions, such as the requirement that highly compensated employees make their catch-up contributions into Roth accounts, starting in 2026, that will require a coordinated effort between plan sponsors and their providers.
“A number of plans still don’t allow or currently have Roth provisions in place in their retirement plan,” Rayll says. “That’s especially true in some of our markets, including the government space, and some of them may be limited by state laws that don’t currently allow them to do Roth contributions.”
Among some plan sponsors, there is also a sense of uncertainty and anticipation that there may be more changes to the law, especially with a new administration in place.
“We already had the mandatory Roth delayed, and you never know, with those provisions that are further down the line, whether Congress will decide to further delay or even repeal them,” Webb says.
