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SECURE 2.0 Key Changes for 2025 - HR ALERTS

SECURE 2.0 Key Changes for 2025

Woman next to phone putting money in oversized piggy bank
Effective: January 1, 2025

Signed into law in December 2022, the SECURE 2.0 Act introduces significant updates to retirement savings. Several key changes will take effect starting January 1, 2025, making it easier for businesses to support their employees' financial well-being while offering new incentives and simplified processes. Here’s what you need to know and how to prepare.


What’s New in Retirement Planning?


  1. Automatic Enrollment in Retirement Plans:

    Effective January 1, 2025, new 401(k) and 403(b) plans must automatically enroll employees at a contribution rate of at least 3%, increasing annually to 10% unless employees opt out. This provision doesn’t apply to existing plans but is expected to boost retirement savings participation overall.


  2. Expanded Eligibility for Part-Time Employees:

    Beginning January 1, 2025, part-time employees working at least 500 hours per year for two consecutive years must be eligible to participate in 401(k) plans, a reduction from the previous three-year requirement.


  3. Starter 401(k) Plans:

    Starting in 2024, businesses without existing retirement plans can adopt "starter 401(k)" or 403(b) plans. These simplified plans have no employer match requirement, making it easier for organizations to introduce retirement benefits without complex setup or maintenance.


  4. Tax Credits for Plan Startups:

    SECURE 2.0 expands tax credits for new plans, allowing businesses with fewer than 50 employees to claim up to 100% of administrative costs for three years (capped at $5,000 per year). Additionally, employers may receive credits for contributions of up to $1,000 per employee.


  5. Emergency Savings Options:

    Employees will soon be able to withdraw up to $1,000 annually from their retirement savings for emergency expenses without penalties. This feature provides much-needed flexibility while maintaining the integrity of long-term savings goals.


Why These Changes Matter:

Retirement benefits play a crucial role in attracting and retaining employees. The enhancements introduced by SECURE 2.0 simplify plan adoption for businesses while giving employees greater flexibility and access to savings options. These changes make it easier for organizations to offer meaningful benefits that can improve financial security and job satisfaction.


Steps to Prepare for SECURE 2.0:


  • Review Current Plans:

    Evaluate your retirement offerings to ensure they align with the new provisions.


  • Educate Employees:

    Proactively share updates with your team to help them understand the new options available.


  • Add a Retirement Plan in 2025:

    If you don’t currently offer a retirement plan, consider implementing one, such as a starter 401(k), to take advantage of tax credits and simplified plan designs.


  • Consult Experts:

    Work with Vida HR or financial advisor to navigate these changes and maximize the benefits for your organization.


SECURE 2.0 offers a unique opportunity to strengthen retirement planning while supporting employees in achieving their financial goals. Taking steps now to adapt to these changes will ensure your organization is prepared for the evolving landscape of retirement benefits.


Get day-to-day updates on SECURE 2.0 2025 Key Changes visit the Vida HR Knowledge Center (Vida HR Clients Exclusive).

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