SECURE 2.0 Act Changes Effective in 2024 – Key Considerations for Retirement Plan Sponsors

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The SECURE 2.0 Act of 2022 (“SECURE 2.0”) became law on December 29, 2022, making sweeping changes to employer-sponsored retirement plans.


SECURE 2.0 includes provisions intended to expand coverage, increase retirement savings, and clarify retirement plan rules.

It is important for plan sponsors to understand the SECURE 2.0 provisions taking effect in 2024 that will impact plan design and administration. These provisions include changes to contribution limits, contribution types, age limits, participation requirements, and withdrawals. Plan sponsors should act now to ensure that their plans comply with mandatory amendments and take advantage of desired permissible amendments prior to January 1, 2024.

A summary of the key 2024 SECURE 2.0 changes for retirement plan sponsors are set forth below.

Age-Based Catch-Up Contributions

Under current law, if catch-up contributions are permitted by the plan, these contributions can be made on either a pretax basis or an after-tax basis. As originally enacted, January 1, 2024, Section 603 of SECURE 2.0 provides that catch-up contributions must be treated as after-tax contributions if the participants are age 50 or older and their wages exceeded $145,000 in the previous calendar year. If an employee’s wages were less than or equal to $145,000 in the previous calendar year, the employee is permitted to make catch-up contributions on a pre-tax or an after-tax basis. The wage floor for required Roth catch-up contributions will be adjusted for inflation.

As a result, plan sponsors who permit catch-up contributions and have participants whose wages exceed $145,000 will need to ensure that their plan allows Roth catch-up contributions. While participants must pay tax on Roth catch-up contributions, such participants are permitted to withdraw post-tax contributions and related earnings on a tax-free basis.

New guidance issued by the IRS delays the effective date of the Roth catch-up contribution rule for two years until 2026. The IRS explained that they were addressing taxpayer concerns with being able to timely implement the new Roth catch-up contribution rule, and the two-year delay is intended to facilitate an orderly transition for compliance with the new rule.

The notice also clarifies that catch-up contributions (pre-tax or Roth) can continue to be made for tax years beginning after 2023.

Matching Student Loan Payments

Effective January 1, 2024, Section 110 of SECURE 2.0 permits an employer to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA with respect to “qualified student loan payments”. A qualified student loan payment is broadly defined as any indebtedness incurred by the employee solely to pay qualified higher education expenses. Because the matching contributions on student loan payments must follow the same schedule as other matching contributions under the plan, plan sponsors are allowed to treat qualified student loan repayments as employee elective deferrals for purposes of matching contributions. These matching contributions must be made available to all match-eligible participants.

For purposes of the nondiscrimination test applicable to elective contributions, Section 110 permits a plan to separately test the employees who receive matching contributions on student loan repayments.

Emergency Savings Accounts

Under SECURE 2.0 Section 127, effective January 1, 2024, plan sponsors are permitted to add an emergency savings account associated with a Roth account to their retirement plan. Non-highly compensated employees, defined as those earning up to $150,000 in 2023, may be automatically enrolled at up to 3% of their compensation, but no higher than $2,500 annually. The plan can set this limit to a lower amount if desired by the plan sponsor. Note that employer matching is also limited to up to $2,500 annually.

Contributions are made on an after-tax basis and, for purposes of matching contributions, are treated as employee elective deferrals. Withdrawals can be made from emergency savings accounts tax and penalty-free. Plan administrators will be allowed to rely on a participant’s self-certification for distributions out of this account. However, the IRS still needs to issue guidance for situations in which the plan sponsor knows of employee misrepresentations.

Penalty-Free Early Distributions

Under current law, there is a 10% penalty for early distributions made before the age of 59 ½. SECURE 2.0 provides that there will no longer be a 10% early distribution penalty assessed on withdrawals of up to $1,000 if funds are used for unforeseeable emergency expenses. Taxpayers can take three years to repay the early withdrawal but will not be able to make any additional emergency withdrawals during this time until the repayment is complete.

Effective for distributions made after December 31, 2023, Section 314 allows penalty-free distributions to domestic abuse victims. Domestic abuse survivors will also be able to take early distributions of up to $10,000 or the equivalent of 50% of the account balance, whichever amount is less. This withdrawal will not be subject to the 10% early distribution tax and participants will need to self-certify that they have experienced domestic abuse. The withdrawn amount can be repaid over three years and the income taxes on the repaid amount would be refunded upon repayment.

Automatic Enrollment Relief

Under SECURE 2.0, employers will be allowed to self-correct automatic enrollment mistakes without a penalty up to nine months following the end of the plan year where the mistake was made, but only if automatic enrollment and contribution escalation arrangements are established.

Small Balance Cash-Outs

Under current law, employers may transfer the 401(k) account of former employees to an IRA if the employee’s balance is no more than $5,000. Section 304 of SECURE 2.0 increases the limit from $5,000 to $7,000. Roth accounts are exempt from the required minimum distribution requirement.

Section 304 is effective for distributions made after December 31, 2023.

Key Action Items

  • Many changes imposed by SECURE 2.0 depend on the demographic information of plan participants, such as age or employment status, so it is important for plan sponsors to maintain current and accurate census information.
  • Plan sponsors should maintain a compliance calendar to docket deadlines for required changes to ensure SECURE 2.0 provisions are implemented in a timely manner.
  • Plan sponsors should work with benefits counsel to perform a retirement plan review and prepare plan amendments, as applicable, reflecting the required and permissible changes under SECURE 2.0.

For additional questions, please contact Emily Langdon at

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