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In Practice February 28, 2025
SECURE 2.0 Provisions Should Boost Adviser Revenue in 2025
Two-thirds of plan advisers say the newly enacted provisions will increase their revenue, in addition to increasing employee participation, according to a Fuse survey.
Reported by Mike Katz
Art by Davide Comai
Most retirement plan advisers expect to see their revenues grow this year, thanks to key provisions of the SECURE 2.0 Act of 2022 that take effect this year, according to a survey from asset management consultant Fuse Research Network.
The SECURE 2.0 Act of 2022, which passed in December 2022, is an expansion of the Setting Every Community Up for Retirement Enhancement Act of 2019 that intended to drive workers to save more for retirement and to create more defined contribution plans. Several significant changes that were included in SECURE 2.0 did not come into effect until January 1, 2025.
One such change requires companies with at least 10 employees with 401(k) and 403(b) plans established on or after December 29, 2022, to automatically enroll participants in the respective plans as soon as they are eligible, with the exception of employees who choose to opt out. The initial automatic enrollment salary deferral amount must be between 3% to 10%, increasing automatically by one percentage point each year until it reaches a cutoff between 10% and 15%. All 401(k) and 403(b) plans established before December 29, 2022, are grandfathered in and are not required to add automatic enrollment provisions.
Another provision that took effect January 1 introduced a “super” catch-up limit for employees aged 60 to 63. The new law increased the limits to the greater of $10,000 or 50% more than the regular catch-up amount. The limit on catch-up contributions prior to the law taking effect was $6,500, except for SIMPLE plans, which had a $3,000 limit.
Employers are also now required to allow long-term, part-time workers to participate in their 401(k) plans and 403(b) plans if they have completed at least 500 hours of service in each of two consecutive 12-month periods and are at least 21 years old by the end of the second 12-month period.
The survey found that approximately two-thirds of the retirement plan advisers polled said they expect the new provisions to boost their revenue by at least 1%, with 59% expecting a 1% to 10% increase and 9% expecting 10% revenue growth or more. At the same time, one-third of advisers said they do not expect any increase in revenue from the new rules. The survey polled advisers with at least 10 DC plan clients, 79% of which have at least 25 DC plan clients.
“This is a very positive response from DC plan advisers, because the SECURE 2.0 opportunity is helping establish small, new retirement plans—where the profit margins tend to be slim for relatively more work,” Loren Fox, Fuse Research Network’s director of research, said in a statement.
The survey also found that plan advisers have already been working with employers over the past couple of years to meet the new requirements of SECURE 2.0, with 79% working on implementing auto-enrollment for DC plans with $1 million to $10 million in assets. It also found that 56% of plan advisers are working on auto-enrollment with plans that have less than $1 million in assets, and 51% are working on auto-enrollment in plans with $10 million to $100 million in assets.
“This suggests [the] SECURE 2.0 Act could really kickstart a lot more 401(k) and 403(b) plans, and lift employee participation through auto-enrollment and growing contributions to the plans,” Fox said in the statement.
