Employers Need Advice on Most Optional SECURE 2.0 Provisions

While employers seem to be embracing “well-worn provisions” of the SECURE 2.0 Act of 2022, most express lukewarm interest in optional add-ons to retirement plan design and management, needing more legal counsel before implementation, according to Alight’s 2024 “Hot Topics in Retirement and Financial Wellbeing” report.

Alight found that, despite provisions intended to expand retirement plan offerings to participants, 2024 will likely see more attention paid to areas with which sponsors are already familiar.

“The most popular provisions are ones that have a well-worn playbook. For example, increasing the cash-out limit is pretty easy, because plans already have cash-outs,” says Rob Austin, head of research at Alight Solutions. “Likewise, increasing the catch-up threshold involves simply changing a number for certain ages. It’s a relatively easy lift from a legal and administration perspective for employers.”

The provision that employers reported they are most likely to add soon, even without clear legal guidance, was the increased force-out limit for vested balances up to $7,000 in defined contribution plans (60% of respondents), according to the survey of plan sponsors. Additionally, 34% of employers said they will definitely add the provision, and 26% said implementation is likely. Alongside the force-out limit, the provisions employers said they will definitely or “likely” add were hardship self-certification (60%) and super catch-up contributions for participants aged 60 to 63 (62%).

Not Yet

Employers, however, reported hesitancy about more novel SECURE 2.0 provisions that involve building new programs, such as student loan payment matching or emergency savings sidecars for retirement plans.

“Some of the new provisions of SECURE 2.0 venture into uncharted territory,” Austin says. “For example, plan amendments and administrative programming must be built from scratch, and that takes time. Layer in the fact that that some of these provisions have some legal uncertainty, and you can quickly see why many plan sponsors are not jumping in right away to add them.”

Among respondents, 100% said they would need more legal guidance before considering student loan matching contribution. Most employers also felt additional legal advice was necessary for an employer match to Roth contributions (89%), a $2,500 Roth sidecar emergency savings account (83%) and a non-elective employer contribution via Roth contributions (75%).

Wait-and-See Approach

The survey revealed stark results when it asked about definitive implementation of optional SECURE 2.0 provisions. Respondents displayed minimal to no interest in implementation of a saver’s match contribution (1%), a non-elective employer contribution to a Roth account (1%) and a $2,500 Roth sidecar emergency savings (0%). Employers were more likely to select “unsure,” “unlikely to add” or “definitely not adding” for these categories.

Provisions on which employers were divided between adding without clear guidance and delaying for more legal clarity included hardship self-certification (50% vs 38%), $10,000 domestic abuse withdrawals (37% vs 53%) and $22,000 withdrawals for disasters (32% vs 63%).

Alight’s 2024 Hot Topics in Retirement and Financial Wellbeing report is the 20th installment of the survey and features responses from almost 100 organizations employing 3 million workers. The survey was conducted in fall 2023.