SECURE 2.0 Act
The SECURE 2.0 Act (Setting Every Community Up for Retirement Enhancement) was established in 2022 to improve retirement savings options. The act comes at a crucial point in the world of retirement planning, where nearly two thirds of U.S. employees feel their retirement savings are not on track and around a quarter of non-retired adults have no retirement savings at all, according to The Motley Fool.
SECURE 2.0 is intended to encourage individuals to save more for retirement, improve retirement plan regulations and lower the employer cost of setting up a retirement plan. In order to accomplish these goals, this robust Act contains over 90 provisions – making the implementation of the Act a daunting task for plan sponsors. By using some of the following strategies, plan sponsors can help simplify the implementation process and ensure they are remaining compliant with the required provisions as they become effective.
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Strategy 1: Evaluate the provisions
Not all the act’s 90 provisions are mandatory. As a result, plan sponsors should begin the implementation process by evaluating each optional provision and determining which of the optional provisions would be prudent to enact. For optional provisions, plan sponsors should ask themselves the following questions:
- Is the provision applicable to my participant base?
- Does my organization have the capabilities to implement the provision?
- Is now the best time to implement the provision?
Strategy 2: Adhere to deadlines
Making the SECURE 2.0 implementation process even more complicated is the fact that not all of the act’s 90+ provisions go into effect at the same time. Some of the provisions went into effect in 2023 while others go into effect in 2024, 2025 and later. Be sure to take note of deadlines and plan accordingly so that you are ready to implement by the effective date.
Strategy 3: Delegate responsibilities
After you understand which provisions are applicable and when they need to be implemented by, the next step is to determine who will be responsible for the implementation. For example, will your third-party administrator (TPA) take the lead? If so, at what cost? Will they only handle the mandatory provisions? Who will handle the optional provisions you have decided to implement?
Strategy 4: Document, document, document!
With over 90 provisions, documentation is key to a smooth implementation process. In times when unprecedented employee turnover is a part of life, contemporaneous documentation is an insurance policy that will set your plan up for success and allow a successor employee to pick up where the predecessor left off with minimal disruption to plan operations.
Strategy 5: Educate participants
The work doesn’t end once the provisions have been implemented. It takes time and effort to educate participants and answer relevant questions regarding the new provisions, so plan sponsors should be sure to set aside adequate time and resources for participant education.
Related: SECURE 2.0 awareness: Which provisions are workers most interested in?
While the SECURE 2.0 Act may seem daunting at first glance, utilizing the above strategies and working together with a third-party administrator (TPA) can help plan sponsors ensure they are complying with the new legislation as its various provisions become effective. For further guidance, consider reaching out to a trusted accounting partner.
Grace Gonzalez has been an Assurance Partner serving tax-exempt organizations and the retirement plans they sponsor since 2007 when she joined The Bonadio Group. She focuses on financial institutions, philanthropic organizations and employee benefit plans. Grace is a frequent speaker on accounting matters at regional and national conferences and a trusted advisor to organizations ranging in asset size from a few million to over seven billion.
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