Employee Benefits Law Blog

Plan sponsors should begin preparing now for the upcoming deadline to formally amend retirement plans for compliance with SECURE 2.0. We previously discussed several of the SECURE 2.0 changes in this article: https://www.fosterswift.com/newsroom/publications/must-know-secure-summary-key-provisions

For most qualified retirement plans, including 401(k) plans, profit sharing plans, ESOPs, and certain 403(b) plans, SECURE 2.0 amendments generally must be adopted by December 31, 2026.

Many SECURE 2.0 provisions have already been operationally effective for several years. The next compliance step is to ensure that the plan document is updated to reflect the provisions that apply to the plan and, where applicable, the way the plan has actually been administered. SECURE 2.0 includes both mandatory amendments and optional plan design changes, so plan sponsors should review these requirements carefully before the amendment deadline.

Key SECURE 2.0 Provisions Affecting Retirement Plans

Plan sponsors should pay particular attention to the following SECURE 2.0 provisions:

• Expanded eligibility for long-term part-time employees (“LTPT Employees”). Certain employees who complete at least 500 hours of service during consecutive eligibility periods must be permitted to participate in 401(k) plans for purposes of making elective deferrals. The long-term part-time employee rules were first introduced by the SECURE Act of 2019, and SECURE 2.0 shortened the applicable service period and expanded these eligibility requirements. As a result, plan sponsors should confirm that their payroll and recordkeeping systems are tracking hours properly and that eligible LTPT Employees are timely offered the opportunity to participate.
• Higher catch-up contribution limits for participants ages 60 to 63. Eligible participants who are nearing retirement may be permitted to make enhanced catch-up contributions. For participants ages 60 through 63, the annual catch-up contribution limit is increased to the greater of (i) $10,000 or (ii) 150% of the regular catch-up amount for 2024, indexed for inflation. This change may provide additional flexibility for participants who are trying to increase their retirement savings in the years immediately preceding retirement.
• Roth catch-up contribution requirements. Plans that permit catch-up contributions may need to address new Roth catch-up contribution rules for certain higher-income participants. Generally, catch-up contributions made by employees whose wages exceeded the applicable threshold for the prior year must be made on a post-tax Roth basis. This means those contributions are included in taxable income when contributed, rather than deferred until distribution. Because this change may affect participant expectations and tax planning, it should be communicated clearly before implementation.
• Required minimum distribution (RMD) changes. SECURE 2.0 also changed the required beginning date for required minimum distributions. The RMD age increased to 73 and is scheduled to increase again beginning January 1, 2033. These changes may allow participants to keep assets in a retirement plan longer, but they also require plan sponsors and administrators to confirm that plan documents, participant communications, and distribution procedures are consistent with the updated rules.

In addition to mandatory changes, SECURE 2.0 gives plan sponsors the opportunity to consider optional provisions, including increased involuntary cash-out limits, new distribution features, and other participant-friendly administrative changes. Whether these optional provisions make sense will depend on the plan’s design, participant population, administrative capabilities, and broader retirement plan goals.

Do Not Wait Until the Last Minute

Although the formal amendment deadline may still seem distant, plan sponsors should begin reviewing their plans now. The amendment process often requires coordination among legal counsel, recordkeepers, third-party administrators, payroll providers, and internal human resources or benefits teams. Beginning that process early can help ensure that the plan document accurately reflects required SECURE 2.0 changes, any optional provisions the sponsor elects to adopt, and the way the plan has been administered in practice.

If you sponsor a 401(k) plan, ESOP, profit sharing plan, or other qualified retirement plan and would like to discuss your SECURE 2.0 obligations, please contact a member of Foster Swift’s employee benefits team. We would be happy to help you evaluate the provisions that apply to your plan and prepare for the upcoming amendment deadline.