The SECURE Act (Setting Every Community Up for Retirement Enhancement) was enacted into law in December 2019, marking the most significant set of changes to the U.S. retirement system since 2006. There’s something for everyone – plan sponsors, employees and savers alike.

But the provisions all come together with little apparent rhyme or reason. Some changes are required, others are optional. Some provisions have tight deadlines. Others give you more breathing room. And, relevance depends on your plan and its pool of participants and variations like numbers of full- to part-time workers.

In short, this is likely to get complicated. Now is the time to start working with your advisors and in some cases, third party administrators to make sure you and your employees understand the implications of the SECURE Act and are ready to respond.

Among the most significant changes:

  1. Improved tax credits for small employers: Improved tax credits are intended to encourage employers with 100 or fewer workers (or 40% of the workforce) to put retirement plans in place. These include a startup cost tax credit of up to $5,000 per employee and a $500 per employee tax credit for three years for adding auto enrollment to their plans.
    Next steps: These tax benefits are a powerful incentive to employers to take a look at their plan options now. Plans that don’t have the auto enrollment feature should make this change immediately.
  2. 401(k) plan changes cover auto enrollment cap, safe harbor notices, credit card plan loans: Three significant provisions to 401(k) plans intend to encourage better savings habits:
    • The cap on employee pay contributions for auto enrollment was increased to 15% from 10%, a significant way to narrow the retirement savings gap.
    • Plans providing non-elective contributions no longer have safe harbor notice requirements. Plan sponsors can switch to a safe harbor with non-elective contributions, but at a raised contribution of 4% if on or after the 30th day before the end of the following plan year.
    • Plan loans through credit cards are now prohibited and treated as distributions; applicable to all tax-qualified plans.
    Next steps: Take advantage now of the raised auto enrollment cap to avoid the drop-off in participation that often occurs once the 10% cap is hit. The safe harbor liberalization is another immediate action item for such 401(k) plans. Communicate the prohibition of credit card plan loans to participants.
  3. Long-time, part-time employees no longer excluded: The SECURE Act changes makes it mandatory to offer part-time workers with long service records the opportunity to participate in defined contribution retirement plans, effective Jan. 21, 2021, with certain provisos: They must meet the one year/1,000 hours of service rule, or three consecutive years with 500 hours of service. Discrimination testing doesn’t apply; employer contributions aren’t required.
    Next steps: Make sure you have the systems in place and are ready to track such employees’ hours now. This includes looking at the hourly records for all part-timers on the payroll so no one is overlooked. Don’t wait.
  4. Lifetime income – portability, disclosure and safe harbor changes: In addition to addressing the overall shortfall in Americans’ retirement savings, this group of required provisions responds to issues that keep annuities underutilized as retirement investment options:
    • One provision makes distributions portable, without penalty, if the participant moves to a plan without this lifetime income option.
    • Defined contribution plans also are required to provide participants with statements showing their account balances as equivalent lifetime income streams at least once during the year. This can be an eye-opener that motivates many to save more. But the challenge to plan sponsors is the lack of a standard way to develop this information.
    • Fiduciaries are granted a safe harbor on selecting annuity providers, making it far less risky for sponsors to offer annuities in their plans and more rewards for participants. While fiduciaries are expected to continue to make prudent decisions in selecting annuity providers, they aren’t required to select the lowest cost contract or review the appropriateness of a selection after the contract’s purchased. Written, annual representations from the insurer suffice as reviews.
    Next steps: Adopt lifetime income options, accept rollovers of lifetime income investments and determine your strategy for disclosures.
  5. Penalties for failing to file get steeper: Regulators stiffened the price to be paid for not following the rules on required filings:
    • Form 5500 penalty – $250 a day, not to exceed $150,000
    • Registration statement: $10 per participant, not to exceed $50,000
    • Change in status notice: $10 per day, not to exceed $10,000 for any failure
    • Withholding notice: $100 per failure, not to exceed $50,000
    Next steps: Get diligent about your filings – especially the Form 5500.

While the provisions of the SECURE Act are vastly disparate, they all come together to serve a common goal – to help the ultimate participant get into a better position to comfortably retire. This points us in the right direction. For more information, visit

HUB International’s team of retirement plan specialists provides ongoing guidance on your plan’s setup and management to ensure it meets regulatory compliance guidelines and the interests of your employees.