SECURE 2.0 quarterly update
Implementation updates
As of January 1, 2025, Vanguard has implemented the reduced eligibility period for long-term part-time (LTPT) employees and applied these rules to 403(b) plans. In addition, the mandatory automatic enrollment requirement for new plans established after December 29, 2022 is now in effect, and the Department of Labor (DOL) has established the Retirement Lost and Found Database. The optional higher catch-up contributions provision also became effective January 1, 2025, allowing participants between the ages of 60 and 63 to bolster their savings. Plan sponsors have the option of adding the higher catch-up provision to their plans now. It is important to remember that starting in 2026, catch-up eligible participants who earn more than $145,000 in FICA wages in the previous calendar year will need to make catch-up contributions to a Roth account, effective January 1, 2026.
The beginning of 2025 has also yielded several pieces of regulatory guidance from government agencies such as the IRS, which alter some of the provisions below. Additional information about these changes can be found under the Regulatory tab in this update.
Background and perspective
This provision, originally introduced through the SECURE Act of 2019 (SECURE Act), allows long-term port-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 21, 2020. SECURE 2.0 expanded the provision to include ERISA-governed 403(b) plans and also reduced 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.
Plan sponsor actions and resources
- 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 for full-time participants.
- Please ensure that you send Vanguard complete records for your part-time employee hours. Without historical hours on file starting from January 1, 2021, we will be unable to complete the eligibility determination, and you will need to identify this population manually.
- Notify your client success executive if you believe we are missing historical hours or other demographic data for your part-time employees.
- If you calculate eligibility using an actual hours method, you should continue to track and identify employees who have met the LTPT work eligibility requirements as of January 1, 2024.
- Vanguard has created a template and instructions to guide you through this process, which your plan administration contact can provide.
- In addition to the template, please ensure that LTPT employee records are being sent to Vanguard using your standard file process so that the employees can enroll once you identify them as eligible.
- If your plan determines vesting using an actual hours method, please ensure that you send vesting hours for your part-time employees so that vesting can be accurately calculated. One year of vesting credit will be applied for each 12-month period in which an LTPT employee has completed at least 500 hours of service, beginning on January 1, 2021, or beginning on January 1, 2023, for 403(b) plans subject to ERISA.
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 not to contribute or to contribute a different amount. This provision became effective January 1, 2025, and requires employers that 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. 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
- Vanguard implemented this required provision on January 1, 2025.
- On January 14, 2025, the IRS and Treasury Department published proposed regulations that would provide guidance on the new automatic enrollment requirements. Under SECURE 2.0, 401(k) and 403(b) plans established after December 29, 2022, must provide for automatic enrollment and automatic escalation for plan years beginning on or after January 1, 2025. The proposed guidance clarifies, among other things, that:
- A merger of two plans established prior to December 29, 2022, will not constitute a new plan and is not subject to the autoenrollment requirements.
- A merger of a plan established after December 29, 2022, with a plan established prior to that date will generally be treated as a new plan unless certain circumstances apply.
- For more information on these proposed regulations, please visit the Regulatory Roundup page.
- On January 14, 2025, the IRS and Treasury Department published proposed regulations that would provide guidance on the new automatic enrollment requirements. Under SECURE 2.0, 401(k) and 403(b) plans established after December 29, 2022, must provide for automatic enrollment and automatic escalation for plan years beginning on or after January 1, 2025. The proposed guidance clarifies, among other things, that:
To learn more about how Vanguard is complying with this provision, view 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, in 2024, the DOL issued an Information Collection Request (ICR) outlining the information needed from plan sponsors and the suggested collection method. As a result of public comment, the DOL has revised the ICR and streamlined the amount of information requested. The DOL Retirement Savings Lost and Found Database was launched on December 27, 2024.
Plan sponsor actions and resources
- In the final ICR, plan administrators are requested to voluntarily provide data that the DOL views as necessary to establish the database.
- The DOL has created a template in a Microsoft Excel/CSV format for submitting the requested information, including:
- Name and contact information for the plan, plan sponsor, and plan administrator.
- Name and Social Security number for separated vested participants who are age 65 or older and have not taken full distribution of their account.
- Name and Social Security number for deceased participants who would have been age 65 or older and whose beneficiary is entitled to a benefit.
- Name, Social Security number, and payment date when a benefit has been paid out fully for any participants previously reported to the Retirement Savings Lost and Found.
Note:
Vanguard will await further guidance from the DOL prior to building a service supporting submissions to the Retirement Savings Lost and Found Database on behalf of our plan sponsors. In the meantime, if a plan sponsor wants to voluntarily comply, Vanguard recordkeeping teams can run reports to provide the requested data to plan sponsors, but plan sponsors will need to complete the submission to the database. We recommend plan sponsors consult with their ERISA counsel prior to submitting data voluntarily to the DOL’s database.
Updates on other solutions for 2026 and beyond
- In accordance with an IRS proposed regulation issued on January 13, 2025, plans that currently offer catch-up contributions without a Roth contribution feature may continue to do so. However, Roth-required participants will not be eligible to make any catch-up contributions. Therefore, plan sponsors will still be required to track Roth-required participants.
- Plans that offer catch-up contributions with a Roth contribution option will need to ensure that Roth-required participants make catch-up contributions only as Roth contributions.
- Plans that offer catch-up contributions without a Roth contribution option will need to ensure that Roth-required participants do not make any catch-up contributions at all.
- Vanguard strongly encourages the addition of a Roth contribution option to provide tax diversification for all participants, with the added benefit that Roth-required participants will be able to continue making catch-up contributions after January 1, 2026.
Reminder: Plan amendment deadlines
Now that 2025 is underway, 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 2025. However, plan sponsors should decide if making certain amendments now (for example: 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:
