What’s Next for SECURE 2.0 and Secure Choice?
Key provisions of the SECURE 2.0 Act will roll out throughout 2025 and 2026, bringing both opportunities and challenges to your clients.
By Ron Ulrich | Digital Exclusive – 2025
For certified public accountants (CPAs), recent legislative changes are offering a chance to initiate valuable retirement planning discussions with clients—both for their personal and business finances.
Passed in December 2022, the SECURE 2.0 Act removes key obstacles to higher savings for both individuals and employers. It expands coverage, provides increased tax incentives, and streamlines plan rules, making it more attractive for employers to offer retirement plans and simpler for employees to participate in them.
Throughout 2025 and 2026, key provisions of the SECURE 2.0 Act will roll out, presenting both planning opportunities and challenges to your clients. Since most Americans are famously underprepared for retirement, many of your clients may not be aware of these upcoming changes and their impact.
Here’s everything you need to know.
SECURE 2.0 Changes
Auto Enrollment Mandate for New 401(k) and 403(b) Plans
Under the SECURE 2.0 Act, most new 401(k) and 403(b) plans must automatically enroll employees at a default contribution rate of 3% of pay, increasing by 1% each year until reaching at least 10%. These requirements take effect for plan years beginning on or after Jan. 1, 2025. Eligible workers must be enrolled unless they affirmatively opt out of the plans. As part of the provisions, employers who establish new plans should also be drafting plan documents with this auto enrollment feature.
Notably, not every employer or plan is subject to the new mandate. The organizations and companies that are exempt from this mandate include those with 10 or fewer employees, those who’ve been operating for less than three years, and those that follow certain plan types (e.g., church sponsored, governmental, and SIMPLE IRA plans). Likewise, any retirement program that was formally adopted before Dec. 29, 2022, remains grandfathered in, even if the program’s effective date falls after the enactment of the SECURE 2.0 Act.
Retirement Plan Access for Long-Term Part-Time Employees
As of Jan. 1, 2025, anyone who’s worked at least 500 hours per year for two consecutive years will be eligible to join their employer’s retirement plan—down from the previous three-year threshold. In October 2024, the IRS issued guidance on including long-term part-time staff in 403(b) plans. Although final rules for 401(k) plans haven’t been released, proposed regulations appeared in November 2023, and the IRS has stated that any effective date won’t precede plan years starting Jan. 1, 2026.
Student Loan Matching Contributions
Many employees struggling to repay student loans miss out on retirement plan matching contributions from their employers because they can’t afford to contribute to the plans. However, under the SECURE 2.0 Act, employers can now base matching contributions on student loan payments even if the employee makes no direct retirement contribution. This applies to borrowers and co-signers repaying their own loans or loans for dependents, provided they certify their payments each year.
Expanded Catch-Up Contributions for Individuals Ages 60 to 63
The SECURE 2.0 Act now enables individuals between ages 60 to 63 to make enhanced catch-up contributions to their retirement plans. They can contribute the greater of $10,000 or 150% of the standard catch-up limit, which will be $11,250 for 2025 (with inflation adjustments in subsequent years). This exceeds the standard $7,500 catch-up limit available to those ages 50 and older, which provides an important opportunity for higher earners approaching retirement to increase their savings. This enhanced limit is available in the calendar year an employee turns 60 years old and reverts back to the standard limit in the calendar year when they turn 64 years old.
For more information, refer to the IRS guidance on 401(k) limit increases and catch-up contributions for 2025.
Roth Catch-Up Contributions for High Earners
Starting in 2026, employees who earn over $145,000 from the same employer in the previous year will be required to use a Roth (after-tax) individual retirement account (IRA) account for their catch-up contributions. This rule, originally set to begin in 2024, was postponed in order to provide more time for implementation and notification. In January 2025, the United States Department of the Treasury and the IRS issued proposed regulations to help plan administrators implement and comply with the new Roth catch-up rule. Employers will have the option to automatically switch employees’ contributions from a pre-tax account to a Roth account without needing new elections from the employee.
Illinois State-Mandated Retirement Plan
The Illinois Secure Choice Retirement Savings Program has been in place since 2018. Like the SECURE 2.0 Act, it offers another opportunity to connect with clients about their retirement savings.
The program is a state-mandated initiative aimed at providing retirement savings options for employees of private-sector businesses that don’t offer employer-sponsored retirement plans.
Notably, there are some similarities and differences between this program and the SECURE 2.0 Act, which are outlined below.
- Automatic Enrollment: Similar to the SECURE 2.0 Act requirement, employees of eligible businesses are automatically enrolled. However, the Illinois plan mandates a 5% payroll deduction into a Roth IRA. Employees can opt out of the plan, adjust their contributions at any time, and convert to a traditional IRA if desired.
- Employer Criteria: Unlike in the SECURE 2.0 Act, which exempts employers with 10 or fewer employees, Illinois employers with five or more employees who’ve been in business for at least two years and don’t offer a qualified retirement plan are required to participate in the Secure Choice program.
- Program Administration: The Illinois plan is managed by the Illinois Secure Choice Savings Board, with Ascensus College Savings Recordkeeping Services LLC handling day-to-day operations. There are no employer fees and employers don’t make contributions to employee accounts.
- Investment Options: The program provides a set of investment options chosen by the Illinois Secure Choice Savings Board. Employers aren’t required to answer questions about the program, manage investment options, process distributions, or provide investment or tax advice. Additionally, employees manage their accounts directly through the Illinois Secure Choice program.
- Penalties for Noncompliance: Employers who fail to comply may face fines of $250 per employee for the first year and $500 per employee for subsequent years.
With more changes ahead, now’s the time to explore how the SECURE 2.0 Act and Illinois Secure Choice program could impact your clients. By taking a proactive approach to guiding small businesses and individuals through these important retirement planning programs, CPAs can enhance their client relationships and establish a service area around a topic that provides year-round value and drives loyalty and business growth.
Ron Ulrich is the vice president of product consulting and compliance at ADP.
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