SECURE 2.0 quarterly update
Implementation updates
Background and perspective
This provision (originally introduced through the SECURE Act of 2019 (SECURE Act), allows long-term part-time (LTPT) participants to make elective deferrals to their company’s 401(k) plan if they work at least 500 hours in each of three consecutive 12-month periods and are at least 21 years old, beginning with service completed after December 31, 2020. SECURE 2.0 expands the provision to include ERISA-governed 403(b) plans and also reduces this requirement to two consecutive 12-month periods of service for employees who are at least 21 years old, beginning with service completed after December 31, 2022. The LTPT provision helps participants save for their future by broadening access to retirement systems for part-time employees, and Vanguard is proud to support it.
Plans that exclude, or wish to exclude, part-time employees should consult with their ERISA counsel to determine if their plans will require amendments to remove or alter their part-time employee exclusions.
Plan sponsor actions and resources for 2025
- If Vanguard calculates your plan’s employee eligibility using an actual hours method, we’ll provide the same experience for LTPT participants as we do with full-time participants. LTPT participants will be identified annually based on hours submitted by your plan.
- If you determine eligibility for any employees in your plan using actual hours, you will need to track and identify employees who meet LTPT eligibility requirements. Please contact your plan representative for instructions on how to report these employees to Vanguard.
- If any employee populations in your plan track eligibility using actual hours, or if your plan currently excludes part-time employees, please consult with your ERISA counsel to determine the applicability of the LTPT provision to your plan. Any changes to eligibility requirements that you may wish to implement in response to this legislation can be completed through a plan amendment under the guidance of your ERISA counsel.
- You have the option to offer employer matching and nonelective contributions for LTPT participants. We encourage you to offer an employer contribution to avoid administrative burden and cost to the plan from payroll updates. If you’re choosing not to offer employer contributions to LTPT participants, please let your client team know. This may require updates within your payroll system.
- To learn more about how Vanguard is complying with this provision, read the LTPT brochure.
Background and perspective
Automatic enrollment allows an employer to automatically deduct elective deferrals from an employee’s wages unless the employee makes an election either not to contribute or to contribute a different amount. This provision becomes effective January 1, 2025, and requires employers who have been in business for three or more years and have more than 10 employees to implement an automatic enrollment provision for a new 401(k) or 403(b) plan established on or after December 29, 2022. Organizations such as church and government plans are not required to offer automatic enrollment. Automatic enrollment encourages employees to save for their future and can increase employee participation in retirement plans—two major steps forward on the path to financial wellness.
Plan sponsor actions and resources for 2025
- Plan sponsors should partner with both Vanguard and their in-house counsel to determine if they are impacted by this required provision. To learn more about how Vanguard is complying with this provision, view the SECURE 2.0-2025 look ahead.
Background and perspective
SECURE 2.0 directed the Department of Labor (DOL) to establish a searchable database that will enable workers to locate retirement benefits that they might be entitled to. Plan sponsors will be responsible for providing the DOL with the information necessary to populate the database; no transfer of assets is required. In an effort to establish this database, earlier this year the DOL issued an Information Collection Request (ICR) outlining the information needed from plan sponsors and the suggested collection method. As the result of public comment, the DOL has revised the ICR and streamlined the amount of information requested. The DOL will also be creating a new website where the information can be uploaded.
Plan sponsor actions and resources for 2025
- The comment period on the revised ICR closed on October 15, 2024. The DOL has completed their review of the comments and have released updated guidance on this provision. Vanguard is reviewing this and will share more information soon. The ICR remains voluntary for plan sponsors, and there's no action required at this time.
Updates on other solutions for 2025 and beyond
Plan sponsors currently offering catch-up contributions without a Roth contribution option should provide Vanguard with instructions on how they would like to comply with this provision as soon as possible. Vanguard strongly encourages the addition of a Roth contribution option to provide tax diversification for participants, with the added benefit that plans will be ready for this provision beginning in 2026.
While work on this provision is in progress, Vanguard is already prepared to track the population of Roth required participants and monitor contributions for this population. We will share more details on our implementation progress on this provision in Q1 2025.
To learn more about how Vanguard is complying with this provision, read the Roth Catch-up brochure.
Reminder: Plan amendment deadlines
As 2025 nears, plan sponsors should review their plan documents to assess areas that require updates to ensure compliance now and in the years to come. At the end of 2023, IRS Notice 2024-2 extended the deadline for plan amendments relating to the CARES Act, the SECURE Act, and SECURE 2.0. Therefore, no mandatory amendments are due by the end of 2024. However, plan sponsors should decide if making certain amendments now (e.g., changes from the CARES Act of 2020) would make sense for their individual plans when it comes to operations and changes already implemented. While many SECURE 2.0 provisions have already taken effect, plan sponsors may want to consider waiting to amend their plans to accommodate future provisions and further government guidance.
Vanguard will continue to share the following important deadlines with you in 2025 and beyond:
