SECURE 2.0 Expands 401(k) Retirement Plans to More Participants

The SECURE 2.0 Act of 2022 builds on themes and provisions introduced by the Setting Every Community Up for Retirement Enhancement Act of 2019 . It bests its predecessor with nearly 100 provisions that usher in sweeping changes to the administration of retirement plans.

SECURE 2.0 opens the door for the introduction of new plans. It includes incentives for new plan sponsors and offers numerous ways to increase plan participation, including auto-enrollment options and coverage for long-term, part-time workers.

Attorneys should prepare for the potential influx of plan document work, service provider agreements, and guidance on documentation and decision-making, particularly when it comes to fiduciary versus settlor decisions.

ERISA attorneys may bear the brunt given their experience in drafting plan documents, reviewing service provider agreements, and navigating DOL and IRS guidance in the qualified plan space.

But those who aren’t ERISA attorneys may find also themselves tasked with helping ensure their clients have correct representation.

How will you prepare? Here are six tips, along with a topline on some of the provisions that make these so important.

Understand SECURE 2.0 Provisions

Some SECURE 2.0 provisions are mandatory, while others are permissive. Assessing and categorizing all provisions now will help clarify the roadmap to fiduciary compliance. It’s also valuable to review and prioritize permissive opportunities.

Many provisions can increase coverage, participation and savings, help attract and retain talent and, in some cases, reduce administrative burden. However, the technical complexity of these provisions may require prioritizing mandatory provisions over permissive provisions in the short term.

Understand SECURE 2.0 Timing

Nearly one-third of the 92 SECURE 2.0 provisions have effective dates of Dec. 31, 2023 or later, so it is important to bear in mind that effective dates vary. In establishing and managing a SECURE 2.0 roadmap, counsel will want to keep in mind the following.

Some effective dates may be dependent on an appropriate agency, typically the DOL and IRS, for finalizing guidance or new regulations. These dates could change.

Immediate action may be required to prepare organizations for compliance, even for provisions with later effective dates—for example, the long-term part-time employee provision.

There may be business benefits to acting sooner than required for some provisions—for example, the student loan matching provision that helps with attracting and retaining talent.

There could be efficiencies in aligning implementation of required and permissible provisions.

Determine Applicability of Each Provision

Many provisions relate to a specific size and/or type of plan. Counsel will want to determine which apply to an organization’s existing plan(s), which may prompt new plans or plan modifications, and which are not applicable to the organization at all.

For example, SECURE 2.0 provisions such as starter 401(k) (starter-K) plans and credits for start-up costs are designed and applicable for small-business owners. Some SECURE 2.0 provisions also apply strictly to corporations and businesses in particular industries.

Consider the Ecosystem

Some SECURE 2.0 provisions are specifically designed to lessen the administrative burden on plan providers, sponsors, and participants. For example, self-certification by participants is prevalent throughout the legislation.

In some ways, this may ease administration. However, many provisions require a major scale-up of recordkeeper, third-party administrator, and payroll-provider capabilities and coordination.

Counsel will play a critical role, ensuring that plan documents are updated as well as helping to weigh service providers’ ability to address SECURE 2.0 mandates, data requirements, and the SECURE 2.0 implementation roadmap. Changes and/or re-negotiations with providers may be required.

Strategize Monitoring Changes

Additional SECURE 2.0 guidance from the DOL and IRS are expected. As is typical with sweeping legislation, technical updates may be required—for example, catch-up contributions likely require a legislative fix.

Plan amendments for SECURE 2.0 are slated for 2025, and 2027 for governmental plans. Counsel will be instrumental in documentation of decisions related to plan amendments as well as drafting such amendments.

Tap into SECURE 2.0 Resources

Counsel will be expected to keep organizations apprised of the latest developments, requirements, and timelines. There will likely be more guidance from the Department of Labor, the Internal Revenue Service, and technical corrections from legislation.

Organizations will require counsel’s support to develop and maintain fiduciary compliance roadmaps for SECURE 2.0 now and as it evolves.

With additional SECURE 2.0 effective dates looming, counsel must act quickly on behalf of clients and prospects. The SECURE 2.0 sequel is much more expansive than the SECURE Act of 2019.

Counsel will play an integral role in helping organizations ensure ongoing fiduciary compliance and capitalize on opportunities to grow plan eligibility, enrollment, and savings.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Author Information

Cindy Dash is senior vice president and general manager of Matrix Financial Solutions and Fi360, part of the Mutual Fund Retirement Solutions business of Broadridge.

Bonnie Treichel is founder and chief solutions officer of Endeavor Retirement, a consulting firm dedicated to solving problems for plan sponsors, advisers, and service providers in the retirement plan industry.