SECURE 2.0 Act: What Employers Need to Know in 2025–2026

The SECURE 2.0 Act (Setting Every Community Up for Retirement Enhancement Act of 2022) overhauled employer-sponsored retirement plans with over 90 provisions rolling out between 2023 and 2027. If you sponsor a 401(k), 403(b), or SIMPLE IRA, multiple provisions are already in effect — and the biggest payroll change lands on January 1, 2026.

This guide covers the provisions that matter most for employers: what’s effective now, what’s coming in 2026, what your payroll system needs to handle, and the specific action items for your plan.

The 6 SECURE 2.0 Provisions Every Employer Must Know

1. Mandatory Auto-Enrollment (Effective January 1, 2025)

This is the headline provision. Any new 401(k) or 403(b) plan established after December 29, 2022, must now include automatic enrollment.

Here’s how it works:

• Default contribution rate: Between 3% and 10% of compensation
• Annual auto-escalation: Must increase by 1% each year until reaching at least 10% (up to 15% max)
• Employee opt-out: Employees can opt out or change their contribution rate at any time

What it means for payroll: Your payroll system must be able to automatically deduct the default contribution percentage for new hires, track annual escalation, and process opt-out requests. If you offer an employer match, this provision will increase participation — and matching costs.

2. Super Catch-Up Contributions for Ages 60–63 (Effective January 1, 2025)

Workers aged 50 and older have always been allowed to make catch-up contributions above the standard 401(k) limit. SECURE 2.0 creates a “super catch-up” for participants aged 60, 61, 62, or 63.

This is optional for employers to offer, but it’s a powerful retention tool for experienced staff approaching retirement. If your plan allows catch-up contributions, consider adding the super catch-up — it signals that you value long-tenured employees.

3. Mandatory Roth Catch-Ups for High Earners (Effective January 1, 2026)

Here’s the critical detail: if your plan doesn’t currently offer a Roth 401(k) option, high-earning employees won’t be able to make catch-up contributions at all.

The action items are clear:

• Check your plan document: Does it currently allow Roth contributions? If not, you need a plan amendment by the end of the 2026 plan year.
• Identify affected employees: Pull prior-year W-2 data and flag any participants with Box 3 wages exceeding $145,000 (this threshold is indexed for inflation — $150,000 for 2026 based on 2025 wages).
• Update your payroll system: Your system must be able to automatically route catch-up contributions to Roth based on prior-year wage data. Manual tracking is a compliance risk.
• Communicate to affected employees: Employees making pre-tax catch-ups today need to understand that starting in 2026, those contributions will shift to after-tax Roth — which means their take-home pay changes.

4. Part-Time Worker Eligibility (Effective January 1, 2025)

The original SECURE Act (2019) required 401(k) plans to allow long-term part-time employees to make elective deferrals after three consecutive years of working at least 500 hours per year. SECURE 2.0 shortens that to two consecutive years.

This means:

• Employees who work 500+ hours in two consecutive 12-month periods must be eligible for elective deferrals
• Employers are not required to provide matching contributions for these employees
• Your HR system must track part-time hours across years to identify eligibility

This is particularly relevant for businesses with large part-time workforces — restaurants, retail, healthcare, and franchise operations.

5. Student Loan Matching (Optional, Effective 2025)

This provision lets employers treat employee student loan payments as elective deferrals for purposes of matching contributions. In practice: an employee who can’t afford to contribute to the 401(k) because they’re paying off student loans can still receive the employer match based on their loan payments.

This is optional — employers choose whether to offer it. But for companies competing for younger talent (especially in healthcare, education, and professional services), it’s a meaningful differentiator.

6. Emergency Savings Accounts — PLESA (Effective 2024)

Plans can now offer a Pension-Linked Emergency Savings Account (PLESA) — a Roth after-tax account where non-highly-compensated employees can save up to $2,500 for emergencies. The first four withdrawals per year are penalty-free.

This is another optional provision aimed at improving financial wellness. It can reduce hardship withdrawals from the actual 401(k) plan, which simplifies administration.

2026 Contribution Limits at a Glance

*2026 figures are projected based on inflation adjustments. IRS will confirm final numbers in Q4 2025.

What Your Payroll System Needs to Handle

SECURE 2.0 isn’t just a retirement plan issue — it’s a payroll system issue. Here’s what your system must support:

• Automatic enrollment deductions: Default percentage for new hires, annual escalation, and opt-out processing
• Age-based contribution limits: Different maximums for under 50, 50–59, 60–63, and 64+
• Roth routing for high earners: Automatically direct catch-up contributions to Roth based on prior-year W-2 Box 3 wages
• Part-time hour tracking: Rolling 12-month period tracking to trigger eligibility at 500 hours over two consecutive years
• Student loan certification: If you offer student loan matching, the system must accept and verify loan payment documentation

iSolved People Cloud handles all of this natively. Contribution limits update automatically each year, age-based routing is built in, and the 2026 Roth catch-up rules for high earners are already being prepared in the platform. If you’re using a consumer-grade payroll system or managing this on spreadsheets, 2026 is the year it breaks.

Your SECURE 2.0 Action Checklist

FAQ

What is the SECURE 2.0 Act?

The SECURE 2.0 Act (Setting Every Community Up for Retirement Enhancement Act of 2022) is federal legislation with over 90 provisions that reshape employer-sponsored retirement plans. It covers auto-enrollment, catch-up contributions, Roth requirements, part-time eligibility, student loan matching, and emergency savings — rolling out between 2023 and 2027.

Does the auto-enrollment mandate apply to my existing 401(k)?

No. The mandate only applies to new 401(k) and 403(b) plans established after December 29, 2022. If your plan existed before that date, you’re grandfathered. However, businesses with 10 or fewer employees, businesses less than 3 years old, and church/government plans are also exempt even if they start a new plan.

What is the super catch-up contribution?

Starting in 2025, plan participants aged 60, 61, 62, or 63 can make enhanced catch-up contributions — the greater of $10,000 (indexed for inflation) or 150% of the regular catch-up limit. For 2025, that’s $11,250 compared to the standard $7,500 catch-up for those 50 and older. This gives near-retirees a window to accelerate their savings. Employers must opt into offering this.

What changes for high earners’ catch-up contributions in 2026?

Starting January 1, 2026, employees who earned more than $145,000 in FICA wages (Box 3 of their W-2) from the plan sponsor in the prior year must make all catch-up contributions as Roth (after-tax) only. If your plan doesn’t currently offer a Roth contribution option, those high-earning employees won’t be able to make catch-ups at all. Most employers need to amend their plan documents by the end of the 2026 plan year.

How does SECURE 2.0 affect part-time employees?

SECURE 2.0 reduced the eligibility waiting period for long-term part-time workers from three consecutive years to two. Employees who work at least 500 hours in two consecutive 12-month periods must be allowed to make elective deferrals to the 401(k) plan. Employers are not required to match these contributions. This is especially relevant for restaurants, retail, healthcare, and franchise businesses with large part-time workforces.

Does SECURE 2.0 affect my payroll system?

Yes, significantly. Your payroll system needs to handle automatic enrollment deductions with annual escalation, age-based contribution limit calculations (different maximums for 50+, 60–63, and 64+), Roth catch-up routing based on prior-year W-2 wages, and part-time employee hour tracking across years. iSolved People Cloud handles all SECURE 2.0 provisions automatically.