What You Need to Know About the SECURE Act 2.0


What You Need to Know About the SECURE Act 2.0

The following is from PIMA’s Fall 2022 Legislative & Regulatory Webinar, updated for recent legislative and regulatory developments.

Retirement plans have been creating a buzz in insurance and financial services since the enactment of the SECURE Act 2.0 (known as SECURE 2.0) on December 29, 2022. SECURE 2.0 impacts 401(k)s, 403(b)s, IRAs, and other retirement plans immediately. Everything from expanded automatic enrollment to catch-up contributions has the potential to expand retirement saving options and preserve retiree income for tens of millions of Americans.

Let’s look at some of the most impactful provisions of SECURE 2.0.


 Though the status of the SECURE Act 2.0 is set, understanding all the updates can be challenging. Much of the bill is geared toward expanding access to retirement plans and enhancing the security of individuals’ retirement funds. This is being accomplished in a number of ways, including:

Expansion of SECURE 2.0 Automatic Enrollment

 Automatic enrollment into employer retirement plans isn’t a new concept, but under the SECURE Act 2.0, retirement plans are required to include automatic enrollment/automatic escalation features (beginning with the 2025 plan year). In addition, the year one enrollment amount is at least 3% up to 10%. Each subsequent year, the deferral rate increases by 1% until it gets to least 10% (but not more than 15%).

Modifications to Small Employer Pension Plans Startup Tax Credits

 In an effort to increase more plan coverage and the number of employer-sponsored plans, the act increases the plan startup tax credit from 50% to 100% of costs for the first three years of a plan’s life. This would apply to employers with up to 50 employees. It also makes changes to pooled employer plans (or PEPs), fixing the current issue with the credit for those small businesses choosing to join multiple employer plans already in existence. They, too, will be able to take advantage of the credit. Such businesses can also receive a second tax credit for employer contributions, up to a per-employee cap of $1,000.

There will be changes to employee stock ownership plans (known as ESOPs) and some assistance for employers seeking to establish such benefits. The change involves the addition of stocks to S corporations, which currently only applies to C corporations. This change will become effective for sales made after December 31, 2027.

Changes to Catch-Up Limits

 Catch-up limits haven’t changed much over the years, allowing individuals 50 years or older to contribute an extra $1,000 annually to their IRAs. Inflation becomes a factor with the SECURE Act 2.0. Catch-up contributions are now indexed to inflation for IRAs. But that’s not all. Changes also include catch-up contributions to 401(k)s. The new legislation increases the 401(k) catch-up contribution limits from $6,500 to $10,000 or 50% more than the regular catch-up amount in 2025 for anyone ages 60 to 63.

Increases to Required Minimum Distributions

 The 2019 SECURE Act increased the required minimum distribution (or RMD) age to 72. The SECURE Act 2.0 increases the age to 73, which started on January 1, 2023. However, starting January 1, 2033, the age will rise again to 75. Beginning in 2024, the act eliminates RMDs for designated Roth accounts in plans. This will eliminate the different RMD treatments between Roth IRAs and designated Roth 401(k) accounts.

Adjustments to the Purchase of Annuities

 The updates in the SECURE 2.0 annuities section affect qualifying longevity annuity contracts (or QLACs), making it much easier to purchase such products — with the hopes of ensuring adequate income throughout a retiree’s lifetime. Along with this adjustment, SECURE 2.0 also facilitates the sales of QLACs with spousal survival rights and clarifies that free-look periods are permitted up to 90 days in regard to contracts purchased or received in and exchanged on or after July 2, 2014.

Expansions to Compliance Resolution

 Both the IRS and DOL believe it would be helpful to expand the self-correction options for employers by amending certain Internal Revenue Code sections and simplifying many of the top-heavy rules. There are three basic components to this section of the new law, including the internal self-correction to more types of errors, the exemption of certain failures to make RMDs, and the internal self-correction to inadvertent IRA errors.

Acceleration to Part-Time Worker Eligibility

 For a part-time worker, a long-term tenure is considered three years or more. Only then would the individual be considered an eligible participant for a retirement plan. The SECURE Act 2.0 cuts the eligibility down to just two consecutive years. The move is largely in response to the increase in the number of part-time workers, making sure these individuals are eligible for employer-sponsored retirement plans.

Inclusions of Student Loan Payments

 One of the more novel additions to SECURE Act 2.0 retirement planning is that of treating student loan payments as elective deferrals to 401(k) plans for matching contribution purposes, effective 2024 and later. This means that employers can now have the option to “match” qualified student loan payments as contributions to 401(k)s, 403(b)s, or SIMPLE IRAs. Just by paying back their student loans, employees could receive matching contributions up to a certain amount — thereby helping younger workers who might not otherwise have the option to save for retirement due to student loan debt.

Establishment of a ‘Lost and Found’ Database

 With workers changing jobs numerous times over the course of their careers, it’s only natural that individuals might lose track of their retirement accounts. SECURE 2.0 attempts to correct this by requiring the DOL to regularly update an online database to make it easier for people to find lost accounts.

The legislation provides a number of other changes as well, but the above are the most significant in expanding the retirement savings options for workers and enhancing the security of retirement funds.




Of course, there are other legislative and regulatory changes on the horizon, including a variety of different retirement-related initiatives or tax reforms, such as:

Fiduciary Correction Programs

Though the SECURE Act 2.0 touches a bit on fiduciary guidelines, another initiative is also in the mix. The DOL has been working to recoup money on behalf of plan participants. So far, the agency has brought in $2.4 billion by way of 1,072 civil and 208 criminal investigations in 2021. That’s down from the previous year, primarily due to voluntary fiduciary correction programs. Employers have been fixing their own plans and taking advantage of different programs to come forward with their corrective plans.

Excessive Service Provider Fees

 One of the biggest compliance issues in the insurance and financial services sector has been excessive service provider fees. That hasn’t changed. In fact, the number of ERISA cases continues to grow. In the last two years, close to 150 cases were filed, and most involved plans using retail value funds versus institutional funds. So, be aware of excessive service provider fees, especially in the type of plan being offered.

Stock Rollovers

 The DOL has been concerned about rollovers recently. At last count, there was roughly $760 billion in retirement savings in employer-sponsored plans, and the agency would like to see that stay in the plans. It’s simply much safer. However, many plan participants have been exploring the idea of “rolling over” their retirement plan assets to IRAs. The general thought is that the move offers more control. The increased interest in stock rollovers has led to the reinstatement of the five-part test for determining a fiduciary, including a financial advisor, when giving rollover advice to clients. The questions are as follows:


Will the advisor be providing advice on a transaction?


Will the advice be given on a regular basis?


Is there a mutual understanding between the plan participant and the advisor that the advice is specifically for the participant?


Will the advice serve as the primary source of information for this rollover?


Is the advice individualized to the participant?

If the advisor answers “yes” to all five, then that advisor is most likely providing fiduciary investment advice. As such, the advisor must follow a prohibited transaction exemption and abide by impartial conduct standards, including:


Receive reasonable compensation for the advice.


Avoid any misleading statements.


Mitigate any conflicts of interest.


Provide disclosure statements upfront for the retirement investor.


Participate in an annual retrospective compliance review.

Environmental, Social, and Governance Funds

ESG funds are here to stay. However, there’s been recent pushback on their automatic inclusion in retirement plans, as many sponsors are taking much more cautious approaches to retirement savings. To that end, the DOL has issued final regulations on ESGinvesting guidelines and how to safely include them in a plan’s portfolio.

Proxy Voting

 Though proxy voting isn’t often discussed, it’s seen some renewed interest from the DOL. If plan participants have not cast their votes, it’s the responsibility of the plan sponsor to do so. However, proxy voting must abide by prudent conduct standards. Refer to the proxy voting section of plan documents for details on handling such a duty.


 As many people know, there was a recent cybersecurity lawsuit where a participant was out $245,000 after a hack into their plan account. While formal guidance is still pending, the DOL provided guidelines for plan sponsors, service providers, and plan participants. For example, a best practice would be to offer participants security tips on IDs, passcodes, and so on — all of which should be standard by now.

However, what’s important to note is that the DOL has been requesting information from employers about their cybersecurity practices. The agency wants examples of what sponsors are doing to secure plans, vet cybersecurity partners and IT providers, etc.


The key to plan operations is following a proven process outlined in a governance charter. It’s all about being prudent in what an organization does with its retirement plan. The goal here is always to do things in the best interest of plan participants.

To stay in the loop surrounding regulatory changes in the insurance industry, become a PIMA member today and join the legislative and regulatory interest group to gain access to its quarterly educational sessions.

Published on April 13, 2023.

PIMA® (Professional Insurance Marketing Association®) is a member-driven trade association focused exclusively on the group-sponsored benefits market.