OPTIONAL FOR PLANS
Effective for: Contributions made after 12.29.2022
Applies to: 401(k) plans, 403(b) plans, and governmental 457(b) plans

Under prior law, employer matching and non-elective contributions were required to be made on a pre-tax basis. SECURE 2.0 allows (but does not require) plans to give participants the option to elect these contributions made on a Roth basis. Plans can offer some, but not all, Roth options if they so choose.

If the plan allows Roth elections for employer contributions, they may only be made by employees that are fully vested in the relevant type of contribution.

Roth employer contributions are not considered wages for purposes of withholding or, except for certain governmental plans, employment taxes. Therefore, employees who elect Roth employer contributions may have to increase withholding or make estimated tax payments to avoid an underpayment penalty.

The reporting obligations that apply to a Roth employer contribution are the same as if: (1) the contribution had been the only contribution made to an individual’s account under the plan, and (2) the contribution, upon allocation to that account, had been directly rolled over to a designated Roth account in the plan as an in-plan Roth rollover. These contributions are taxable to employees and must be reported using Form 1099-R for the year in which they are allocated.

MANDATORY FOR PLANS TO ACCEPT CATCH-UP CONTRIBUTIONS
Effective for: Taxable years beginning after 12.31.2023 (extended to after 12.31.2025 under IRS guidance)
Applies to: 401(k) plans, 403(b) plans, and governmental 457(b) plans

Under the Tax Code, retirement plans may allow participants age 50 and older to make catch-up contributions—elective salary deferrals above the standard annual limit.

Under SECURE 2.0, plans that wish to continue offering catch-up contributions must meet these requirements:

• Roth Requirement for Highly Paid Individuals (HPIs):
  Any catch-up contributions made by participants whose wages (for FICA purposes) from the plan sponsor exceed $150,000(adjusted for inflation) in the prior calendar year must be made on a Roth basis. These participants are referred to as Highly Paid Individuals (HPIs).
• Optional Roth for Others:
  If the above rule applies to any participant for a plan year, the plan must allow—but is not required to mandate—all other participants to elect Roth catch-up contributions.

On September 15, 2025, the Treasury Department finalized regulations under these rules. Although the regulations will not take effect until 2027, the Roth catch-up contribution requirement begins in 2026.

If a plan does not offer Roth contributions, highly paid individuals (HPIs) will not be eligible to make catch-up contributions. Plans may implement a “deemed election” approach, where any catch-up contributions from HPIs are automatically treated as Roth unless the participant opts out of making catch-up contributions.

The regulations also outline correction methods for compliance failures. These may include recharacterizing the contribution on the participant’s W-2 or performing an in-plan Roth conversion. Specific conditions apply to these corrections, including maintaining practices and procedures designed to comply with the rules.

MANDATORY FOR PLANS ESTABLISHED OR EMPLOYERS WHO JOINED MEPS ON OR AFTER 12.29.2022
Effective for: Plan years beginning after 12.31.2024
Applies to: 401(k) plans and 403(b) plans with employer deferral features

Certain plans established on or after December 29, 2022, will be required to add automatic deferral and automatic escalation provisions for participant deferrals. The rule also applies to employers who joined a multiple employer plan (MEP) on or after December 29, 2022.

The automatic deferrals must begin during the first year of participation at a rate between 3% and 10% of the participant’s compensation, increasing 1% per year to at least 10% and no more than 15%. Plans must allow permissible withdrawals by participants within 90 days after the first automatic deferral. In addition, a participant may opt-out of the deferrals or escalations or choose a different deferral percentage.

Amounts automatically contributed must be invested in a qualified default investment arrangement unless the participant elects otherwise.

The requirements do not apply to the following plans:

1. Governmental plans
2. Church plans
3. A plan while the employer maintaining the plan (and any predecessor employer) has been in existence for less than three years. This applies individually to each employer in a MEP.
4. A plan earlier than the date that is one year after the close of the first taxable year in which the employer maintaining the plan normally employed more than 10 employees. This applies individually to each employer in a MEP.

OPTIONAL FOR PLANS
Effective for: Plan years beginning after 12.31.2023
Applies to: SIMPLE IRAs, 401(k) plans, 403(b) plans, and governmental 457(b) plans

SECURE 2.0 permits employers to make employer matching contributions on account of “qualified student loan payments.” For this purpose, a “qualified student loan payment” is a payment incurred by an employee in repayment of a qualified education loan obtained by the employee to pay qualified higher education expenses, but only:

1. To the extent such payments in the aggregate for a year do not exceed the 402(g) deferral limit when added to elective deferrals made during the year, and
2. If the employee certifies annually to the employer making the matching contribution that such payment has been made on the loan. The employer may rely on this certification.

“Qualified higher education expenses” means the cost of attendance at an eligible educational institution as defined in Tax Code Section 221(d)(2).

Matching contributions on account of qualified student loan payments must generally be made on the same terms as matching contributions on account of elective deferrals, including with respect to eligibility, rate, and vesting.

Plans can treat student loan payments as a deferral or after-tax contribution for purposes of SIMPLE, safe harbor, QACA, or starter 401(k) rules. For all other purposes, the student loan payment is not treated as a plan contribution. Further, plans may apply the requirements of the ADP test separately with respect to all employees who receive student loan payment matching contributions in the plan year.

SECURE 2.0 directs the Secretary of the Treasury to prescribe regulations to implement this rule, including regulations:

1. Permitting a plan to make matching contributions on student loan contributions at a different frequency than other matching contributions (not less than annual),
2. Permitting employers to establish reasonable procedures for employees to claim matching contributions, including an annual deadline (not earlier than three months after the close of the plan year), and
3. Issuing model plan amendments that can be adopted by plans.

OPTIONAL FOR PLANS
Effective for: Taxable years beginning after 12.31.2024
Applies to: 401(k) plans, 403(b) plans, and governmental 457(b) plans

As described above, the Tax Code permits a plan to allow participants ages 50 and over the ability to make catch-up contributions over and above the normal annual elective deferral limit. Under prior law, the annual catch-up contribution limit was the same for all participants ages 50 and older.

SECURE 2.0 establishes higher catch-up contribution limits for participants ages 60-63, who would not attain age 64 before the close of the relevant taxable year. The increased limit for plans other than SIMPLE plans is the greater of:

1. $10,000 (as adjusted for inflation), and
2. 150% of the normal catch-up limit for 2024 (as adjusted for inflation).

OPTIONAL FOR PLANS
Effective for: Plan years beginning after 12.31.2023
Applies to: Qualified plans

SECURE 2.0 permits sponsors of qualified plans to retroactively amend the plan to increase benefits under the plan (other than increasing the amount of matching contributions). The amendment must be adopted before the deadline for the employer to file its tax return (including extensions) and may not cause the plan to fail to meet any other Tax Code requirements.

If the employer elects, compliant amendments will be treated as having been adopted as of the last day of the plan year in which the amendment is effective.

OPTIONAL FOR PLANS
Effective for: Taxable years beginning after 12.29.2022
Applies to: Governmental 457(b) plans

Under prior law, for a participant to elect to make deferrals to a 457(b) plan for any month, the participant had to enter into an agreement with the employer providing for the deferral before the beginning of the month.

SECURE 2.0 eliminates this requirement for governmental 457(b) plans and allows deferrals so long as the participant enters into an agreement with the employer providing for the deferral before the compensation is made available.

The “first day of the month” rule remains in place for 457(b) plans sponsored by tax-exempt (non-governmental) entities.