SECURE 2.0 quarterly update
Optional provisions available in 2025
- Higher catch-up contribution limit.
- Matching contributions for student loans.
- Qualified disaster recovery distribution (enhanced solution).
- Emergency expense withdrawals.
- Self-certification for hardship withdrawals.
- Withdrawals for domestic abuse (WDA).
Financial wellness
Available: January 1, 2025
Background and perspective
SECURE 2.0 gives plan sponsors the choice to increase the catch-up contribution limit for participants ages 60-63 at the end of the calendar year to the greater of $10,000 or 150% of the then-current catch-up limit. These amounts will be indexed for inflation after December 31, 2025. Once the participant reaches age 64, the standard catch-up limits apply.
Plan sponsor actions and resources for 2025
- Before adopting this provision, plan sponsors should work with their payroll or in-house department to ensure that additional catch-up amounts can be programmed to deduct the higher catch-up limit for eligible participants (ages 60 to 63).
- Vanguard strongly recommends not adding the higher catch-up contribution limit provision to your plan until your payroll provider is prepared to support the additional contribution deductions for this participant population.
- Vanguard will proactively add the higher catch-up contribution limit to your plan, to become effective January 1, 2025, unless you opted out by November 11, 2024.
- Even if you opted out of the January 1, 2025, effective date, you can add this provision to your plan at a later date.
- Plan sponsors who will see this provision take effect on January 1, 2025, can start to educate employees about their new rights under this optional provision and how catch-up contributions can promote retirement savings. Upcoming educational material available in Q4 2024 includes:
- A "coming soon" notice that plan sponsors can use to inform participants that this optional provision will be available in their plan.
- An informational piece that plan sponsors can use to educate their participants about this provision and how it can help boost retirement savings.
- Updates to existing participant education material to reflect the new higher catch-up contribution limit option.
- Plan amendment reminder for plan sponsors opting out of the January 1, 2025, effective date
- For plan sponsors using Vanguard s pre-approved document, a plan amendment will be required by the December 31, 2026, SECURE 2.0 plan amendment deadline.
- Plan sponsors using a custom document should consult with their in-house counsel to determine the timing of an amendment needed to opt out of this provision. Depending on the language in the custom document, an amendment may be needed by December 31, 2024.
Available: Q1 2025
Background and perspective
This provision gives plan sponsors the option to match contributions on qualified student loan repayments without requiring employees to make elective deferrals. Vanguard is actively partnering with Candidly to provide a robust student loan match solution to our clients.
Plan actions and resources for 2025
- Before determining if student loan matching is the best fit for their plan, plan sponsors should consider several factors, including their current workforce, participation rates, and saving rates.
- Plan sponsors interested in adopting the matching contributions for student loan provision should begin engaging with their payroll provider and ERISA counsel to discuss plan design and testing considerations.
- While matching contributions for student loans is an important part of our package with Candidly, plan sponsors can currently take advantage of several student loan debt services offered by Candidly.
Distributions
Available: Q1 2025
Background and perspective
This provision gives employees access to retirement funds for emergencies, allowing a distribution of up to $1,000 for personal or family emergency expenses without being subject to the 10% early withdrawal penalty. Only one distribution per year is permitted, and participants cannot take additional distributions for three years unless they repay their first distribution. Participants must self-certify in writing that they meet the requirements for this distribution type. Plans offering this penalty-free withdrawal option could give more financial flexibility to participants in need.
Plan sponsor actions and resources for 2025
- Plan sponsors should consider if they want to provide employees with access to retirement savings for nonretirement savings reasons, as well as other benefits offerings, such as Employee Assistance Programs (EAPs) and disability benefits, that may provide participants with access to funds in case of an emergency.
- We encourage plan sponsors thinking about offering this provision to consider the age and retirement preparedness of their employee population.
Available: Q1 2025
Background and perspective
This provision modifies the current hardship rules to allow plans to permit participants to self-certify that a distribution meets the requirements for a hardship withdrawal. A hardship withdrawal is defined as a distribution from a participant’s elective deferral account for an immediate and heavy financial need.
Plan sponsor considerations and resources for 2025
- Plan sponsors can choose to elect Vanguard’s distribution services to allow their participants to work directly with us for hardship self-certification.
- Plan sponsors should decide whether they want to provide easier access to retirement funds for hardships, review their current hardship withdrawal request volumes, and examine their current level of documentation efforts and administrative burden to determine if participant self-certification would benefit their employees.
- To learn more about how Vanguard is complying with this provision, read the Self-Certification for Hardship Withdrawals brochure.
Available: Q1 2025
Background and perspective
Plan sponsors may elect to allow a withdrawal for domestic abuse victims in the amount of the lesser of $10,000 or 50% of the participant’s vested account balance without being subject to the 10% early withdrawal penalty. The amount may be repaid within three years of distribution. The withdrawal for domestic abuse (WDA) provision gives plan sponsors another way to support domestic abuse survivors by allowing participants to take an in-service distribution from the plan.
Plan sponsor considerations and resources for 2025
- Plan sponsors considering this provision should think about how it fits in with their benefits package to best support their employees.
- Plans choosing to offer this optional provision will need to remove administrative spousal consent as a requirement on their plan to allow participants to self-certify that they qualify for a WDA distribution.
- To learn more about how Vanguard is complying with this provision, read the Withdrawals for Domestic Abuse brochure.
Available: Q1 2025
Background and perspective
This provision permits distributions of up to $22,000 for people affected by a federally declared disaster (per disaster) and aren’t subject to the 10% early withdrawal penalty. They may be repaid within three years of the distribution, and the income attributable to the withdrawal may be spread over three years beginning with the year the withdrawal is paid to the participant. Vanguard began offering this on January 1, 2024, which enabled participant withdrawals for the QDRD provision. As part of ongoing technical improvements, Vanguard will implement built-in eligibility rules in Q1 2025, thereby eliminating the need for manual processing.
Plan sponsor considerations and resources for 2025
- Disasters can encompass more than just environmental hazards, so you may benefit from a more holistic internal risk assessment to feel confident in your choice to adopt this optional provision.
- Plan demographics, saving trends, and industry-specific considerations can help inform your decision on whether this provision is a good fit for your organization.
- You may also want to consider the geographic location of your workforce in case it has a historically high rate of natural disasters or other risk factors.
- To learn more about how Vanguard is complying with this provision, read the Qualified Disaster Recovery Distribution 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:
