New year. This means new SECURE 2.0 provisions kick in for employers – some are mandatory, some are optional. Employers have been selectively adopting optional provisions of SECURE 2.0, according to Alight’s 2025 Hot Topics in Retirement and Financial Wellbeing report.
Many plan sponsors have already adopted hardship withdrawals (available for employees’ medical expenses, purchase of a home, funeral expenses, etc.) and raised the IRA force-out limit to $7,000. There is also significant interest from others in incorporating these changes in 2025. Conversely, there is minimal interest among employers in the $2,500 sidecar emergency savings option.
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Employers are starting to implement various optional provisions from SECURE 2.0. Currently, about 30% have incorporated hardship withdrawals, while another 15% said they are definitely adding it.
On the other hand, the $2,500 emergency savings sidecar has gained minimal traction; merely 1% of employers have adopted it, and none have committed to adding it, according to Alight’s report, which is based on a survey of 122 employers. Of those who said they will definitely or likely add the feature, more than half said they plan to add it in 2025.
Almost three-quarters of workers say that they want help from their employer to help reduce student loan debt or refinance at lower rates, according to the report. However, only a handful of employers are offering tools to help. Effective in 2024, SECURE 2.0 allows employers to allocate matching dollars to the 401(k) plan for people who repay student loans. Currently 5% of employers allow this, but prevalence is expected to increase in 2025.
Some of the biggest SECURE 2.0 changes that employers must comply with will go into effect in 2025 –
Required auto-enrollment into new retirement plans: All 401(k) and 403(b) plans established after December 29, 2022 must include auto-enrollment features. These new plans must automatically enroll participants at a default rate of between 3% and 10% of compensation and escalate participants' deferral rate each year at a rate of 1% a year up to at least 10% (but not more than 15%
Higher catch-up contribution limits: The increase in 401(k) contribution limits will be $23,500, up from $23,000. Also, individuals aged 60-63’s “catch up” contributions will see an increase of $11,250, which is up from $7,500 in 2024 or as 150% of “catch up” limit for individuals aged 50.
Long-term part-time worker retirement eligibility: The part-time employee provision lessens the barriers to entry for long-term, part-time employees, who are eligible if they clock 500-999 hours over the course of two consecutive years.
Related: SECURE 2.0 compliance in 2025: Key guidance for 401(k) plan sponsors
Legal uncertainty is keeping some SECURE 2.0 optional provisions from being implemented, according to the Alight report. Many plan sponsors planning to adopt SECURE 2.0 optional provisions aim for a 2025 implementation. However, some provisions require additional legal clarity before setting a timeline. Nearly half of employers specifically seek more legal guidance on the Saver’s Match contribution, which takes effect in 2027, before proceeding.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
