Secure Act 2.0 and Your 401(k) Plan

July 12, 2023 by Stephanie Leduc
Audit & Accounting

The SECURE 2.0 Act (Secure 2.0) was signed into law on December 29, 2022 by President Biden. With the law comes several important changes to employee benefit plans, including 401(k) plans. Below are the top 4 items that will impact 401(k) plans in the coming years.

1. Requirements for automatic enrollment and automatic Increase for some new plans.

Starting in 2025, new 401(k) plans will be required to enroll employees eligible to participate in the plan at between 3% and 10% withholding. Further, plans are also required to automatically increase the participant’s withholding percentage by 1% per year up to between 10% and 15% withholding. There are several important exceptions to these requirements:

  • All existing plans are exempt from these requirements (only new plans are impacted).
  • Other exceptions to these changes include businesses with less than 10 employees, new businesses (less than 3 years) and church and government plans.
2. Student Loan payments as elective deferrals (110)

Starting in 2024, employers will be allowed to make 401(k) matching contributions for amounts of “qualified student loan payments” (QSLP) made by employees during the year. This change is optional for plan sponsors, and adoption of this provision will require a 401(k) plan amendment. These QSLPs are treated the same as employee 401(k) deferrals, and therefore would be matched at the same rate as such deferrals. The amount of total QSLPs eligible for this treatment is limited to the annual IRS employee 401(k) deferral limit ($22,500 for 2023). Both the QSLPs and related employer matching amount are included in the annual IRS retirement plan contribution limit for employees ($66,000 or 100% of compensation for 2023).

3. Required Minimum Distribution (RMD) Changes

Secure 2.0 includes several changes to required minimum distributions starting in 2023. These changes include:

  • Starting on January 1, 2023, the age to begin taking required minimum distributions increased to 73. The age will increase again on January 1, 2033 to 75.
  • The penalty for not taking a RMD was reduced from 50% to 25% of the RMD amount for the year.
  • Starting in 2024, RMDs are not required to be made from 401(k) Roth accounts until the death of the account owner. This change aligns 401(k) Roth treatment with current IRA Roth balance treatment. RMDs for these balances are still required to be taken in 2023.

4. Catch-up Contribution Changes

Within a 401(k) plan, participants over age 50 are allowed to make catch-up contributions, which is an additional contribution amount allowed above the standard participant contribution limit. This limit is determined each year by the IRS ($7,500 for 2023). Secure 2.0 made a few key changes to the current catch-up contribution rules.

  • Starting in 2024, catch-up contributions made by employees with annual compensation of $145,000 (indexed for inflation) are required to be Roth contributions (post-tax). This change is especially important to consider for plans that may not currently allow for Roth contributions, as this could result in employees not being able to make catch-up contributions in such plans.
  • Through 2024, there is one catch-up limit that applies to all participants aged 50 or over. Starting in 2025, two applicable catch-up limits will need to be considered:
    • For participants age 60 to 63, there will be a new catch-up contribution limit of the greater of:
      • $10,000 or
      • 150% of the standard 2024 catch-up contribution limit
    • For participants aged 50-59 and 64+, the standard catch-up contribution limit will apply


Secure 2.0 Act includes several other changes that impact 401(k) and other retirement plans. Please contact your current Copeland Buhl representative or me at or (952) 476-7155 if you wish to learn more.