The 401(k) plan, reimagined: Key SECURE 2.0 changes that take effect in 2024

SECURE Act 2.0 was groundbreaking legislation that created systemic shifts in the retirement savings industry. This is great news for benefits professionals because the recent legislation presents a range of opportunities for employers and their employees, including tax credits, new distribution rules, catch-up contributions, and new plan features.

In the post-SECURE 2.0 era, smaller businesses, those with disabilities, part-time workers, non-profit employees, late savers, and many more will have access to retirement savings and additional benefits. The introduction of additional tools and savings vehicles highlight efforts to build a more equitable retirement system that supports expanded access to savings options for Americans.

Here are some key aspects of SECURE Act 2.0 – and what the provisions mean for benefits professionals.

#1: What makes SECURE Act 2.0 so groundbreaking?

Aside from the breadth of the provisions that offer everything from tax credits to reduced administrative burdens, the legislation will be critical in helping build savings for millions of Americans across the country who were previously unable to take advantage of workplace savings solutions.

The new provisions present tools, options, and tax advantages that can provide unique opportunities for employers to offer improved benefit plans. It’s fifteen times more likely for an employee to save when it’s through an employer-sponsored program. I am excited to see how the legislation will help address the current financial challenges many Americans face, especially in communities that have been underserved in the past.

These communities include small businesses, those with disabilities, non-profit employees, late savers, and many more who will now be able to move forward in creating more financial stability for themselves. SECURE Act 2.0 is a crucial step toward helping millions of Americans manage their debt, while simultaneously saving for retirement and preparing for any unexpected life events that may come their way.

#2: Which SECURE Act 2.0 provisions should benefit professionals know about?

Some of the more interesting aspects of the law, which are designed to serve a wide range of the workforce, include incentives for plan participation, auto-enrollment abilities, provisions for part-time employees, and employer-matching on student loans.

Under SECURE Act 2.0, incentives for increased plan participation allow business owners to provide gift cards and other rewards for employees enrolling in employer-sponsored programs. Implementing auto-enrollment features will also be important to help encourage participation when employees are hired, which has the potential to help businesses attract new employees and retain existing ones while boosting job satisfaction.

One of the most significant benefits of the law over time will be the positive impact on long-term and part-time employees. The legislation ensures that even part-time employees working with companies for shorter periods can have access to essential retirement benefits. This will allow companies to help employees plan better for their retirement and achieve financial stability earlier than they may have been able to in the past.

Employers will also have the option to match student loan payments as if they were contributions to their company retirement plan. This addition allows employees to manage their financial obligations effectively by supporting those who are paying off student debt while trying to save for their retirement.

#3: How do you recommend benefits professionals leverage these provisions to increase plan participation?

The ways in which benefits professionals use the provisions in SECURE Act 2.0 will depend on what the employer wants to include in their retirement plan, and their understanding of what resonates with their employee’s savings goals. Knowing the details and rules of these new provisions will be the most beneficial when presenting options to employees because it will make meeting them where they are in their financial journey easier.

Another way to leverage these provisions will be through employer education. When people have knowledge about benefits and the incentives behind them, it increases the likelihood that they will participate. According to a FINRA study, those with higher financial literacy are more likely to take steps to plan for their long-term financial future.

#4: What important dates and timelines should we be aware of?

Most of the new law’s provisions are not effective until January 1, 2024, or later. However, some optional provisions took effect immediately. It will be important to keep up with what provisions are going into effect at the beginning of each plan year from 2024 and beyond.

Look out for guidance from the Department of Labor and the Internal Revenue Service to understand more about how these provisions can help businesses across the country.

#5: Is there anything else benefits professionals and retirement advisors should be aware of?

The most important thing to know is it’s a great time to start a retirement plan. It’s a key moment for benefits professionals and advisors to serve a massively expanding market.

Benefits pros can help employers enhance their current benefit plans and create new opportunities for businesses that may have faced obstacles in offering or operating a plan in the past. For business owners looking to implement a workplace saving program, SECURE Act 2.0 legislation will make it easier and much less expensive to get started.

#6: What’s the best way to get started?

A great way to get started is to get educated about savings vehicles and tools so that you can be a go-to resource. Consider working with an advisor to navigate the details of new and pending rules so you can learn the best way to maximize savings options over time. The more you know and understand about the advantages and drawbacks of current and pending provisions over the next few years, the better. These initial steps will help deliver significant advantages in an expanding market.

Related: SECURE 2.0: Mandatory and optional provisions for employers

As the retirement landscape evolves, benefits professionals must continue to prepare for new opportunities and changes that SECURE Act 2.0 tailwinds will present across the country.

Staying one step ahead and taking time to understand the key changes outlined in the SECURE Act 2.0 will help benefit professionals better serve their clients and ensure they can take advantage of all available opportunities the legislation provides.

Allison Brecher is General Counsel and Chief Privacy Officer at Vestwell.