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How SECURE 2.0 reforms affect retirement plans

An omnibus bill signed into law on December 29, 2022, has wide-ranging impact on retirement plans and participants.
7 minute read
January 04, 2023
Planning for retirement
Contribution limits
Early withdrawals
Retirement plans
Student loans

With the new year comes a new federal law that makes it easier for retirement plan participants to save—and save more—and for plan sponsors to offer plans and enroll participants.

The SECURE Act 2.0, a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, brings largely good news. 

“SECURE 2.0 will give millions of Americans a better chance for retirement success, and can help employers attract and retain talented employees,” said Janet Luxton, senior ERISA consultant at Vanguard. “Employees will be able to save more through increased catch-up contributions, receive matches on student loan repayments, and maximize retirement savings with increased Roth opportunities.”

Most of the new law’s provisions are not effective until January 1, 2024, or later. However, some optional provisions are effective immediately.

Here are several highlights of the new law and explanations of what they mean for plan sponsors and participants. 

Catch-up contributions increase, but for certain workers, must be Roth

Participants ages 60 through 63 can contribute the greater of $10,000 or 50% more than the standard catch-up amount to their defined contribution (DC) plan beginning in 2025. But because the government intends to use the taxes collected from Roth contributions to fund other provisions in the legislation, all catch-up contributions by workers making more than $145,000 must be Roth (that is, made with after-tax dollars) starting in 2024.1 Lower-paid employees may still contribute catch-up contributions on a pre-tax basis. Plans will have to offer a Roth option to allow catch-up contributions of any kind. Both the $10,000 and $145,000 amounts will be indexed for inflation once effective.

What it means for plan sponsors and participants: We encourage the sponsors of plans that do not allow for Roth contributions to consider offering that option, so participants already making catch-up contributions can keep making them—and newly eligible participants can start.

Employer matching contributions based on student loan payments

Beginning in 2024, employers can make employer matching contributions for their employees’ student loan payments, even if the employees aren’t contributing to their plan. These contributions could help employees who are paying off their student loans to start saving sooner—or save more—for retirement.

What it means for plan sponsors and participants: Plan sponsors should consider the participation and saving behaviors of their employees (6-page PDF) before deciding to offer student loan payment matching contributions.


A new provision allows for the automatic transfer of a participant’s account valued at under $5,000 into the new employer’s retirement plan unless the participant chooses otherwise.

What it means for plan sponsors and participants: Participants can benefit from a novel portability feature Vanguard is proud to have helped pioneer. Auto-portability helps plan participants receive benefits to which they are entitled by consolidating retirement accounts from various employers. For plan sponsors, this feature could help reduce the incidence of “missing participants.”

Automatic enrollment now mandatory for new DC plans

The new law requires employers to adopt automatic saving provisions in DC plans that are established after 2024. Employers offering new retirement plans must automatically enroll new hires at a saving rate of at least 3% of pay and automatically increase their saving rate by at least 1% every year up to at least 10% but not to exceed 15%.

What it means for plan sponsors and participants: Employers that currently offer 401(k) or 403(b) plans are not required to add these automatic features. However, Vanguard research shows that automatic plan designs increase both saving and participation rates. For plans without automatic plan design, plan sponsors may want to consider adding these features. 

Other noteworthy changes

  • Participant access to emergency savings. Beginning in 2024, SECURE 2.0 provides employers with two ways to allow participants access to funds in case of an emergency. First, employers may offer participants an emergency savings withdrawal of up to $1,000 per year. This withdrawal is not subject to an early withdrawal penalty and may be repaid over three years. Second, in addition to or instead of the emergency savings withdrawal, employers may offer non-highly compensated participants an emergency savings account as part of their retirement plan. Employees may voluntarily contribute or may be automatically enrolled at up to 3% of their annual pay (capped at $2,500). Contributions will be after-tax and subject to the plan’s match (if any). Participants may take a distribution from their emergency savings account at any time.
  • Delayed required minimum distributions (RMDs). The age at which participants must begin taking distributions from their retirement accounts jumps from 72 to 73 beginning January 1, 2023, and to 75 in 2033.
  • Improvements to performance benchmarks for target-date funds. Current regulations require a fund’s investment performance to be compared with a market index benchmark. This does not properly account for target-date funds (TDFs), which feature a mix of asset classes. Under the new law, TDFs will be able to use benchmarks that are more accurate and effective, allowing participants to make more informed investment choices.

The not-so-good news about 403(b)s and CITs

Despite intensive advocacy efforts by Vanguard, among others, the new law does not include the necessary provisions to allow 403(b) plans to offer low-cost investments through collective investment trusts (CITs)—popular options in 401(k) plans. For now, participants in 403(b) plans can invest only in mutual funds and certain insurance products.

Vanguard will continue to advocate for allowing CITs to be part of a 403(b) plan’s investment lineup. We are committed to seeing this investment opportunity extended to all retirement plans.


This article highlights only a few of the changes that SECURE Act 2.0 brings. We will continue to study the details and provide guidance on their likely impact on investors, plan sponsors, and participants. 

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1“After-tax” means that participants must pay taxes on the earnings they contribute in the year in which they earn the money. All Roth contributions are after-tax.

All investing is subject to risk, including the possible loss of the money you invest.

Collective trusts are not mutual funds. These investments are available only to tax-qualified plans and their eligible participants. Investment objectives, risks, charges, expenses, and other important information should be considered carefully before investing.

Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the work force. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target date funds is not guaranteed at any time, including on or after the target date.