It’s no secret that Secure Act 2.0 has retirement plan sponsors wondering about next steps to meet the law’s many provisions. Signed into law on December 29, 2022 as part of an omnibus federal spending bill, Secure Act 2.0 is a comprehensive change for all organizations with a retirement benefit.

The new law will have special significance for operations that employ a large number of lower-income workers, as Secure Act 2.0 will help make it easier for organizations to offer retirement plan benefits for their workers.

Whether they’re skilled line workers, employees at a nonprofit or are low-level managers who are candidates for promotion, improving retirement savings for lower-income workers can be key to attracting and retaining them long-term.

Secure Act 2.0’s major provisions

The Secure Act 2.0 updates the original Secure Act, with its more than 90 provisions designed to make retirement plans more attractive for organizations to offer and employees to participate in.

Some of the major updates in Secure Act 2.0 include an increased age for required minimum distributions (RMDs), increased qualified charitable deductions (QCDs) and rules for rolling excess funds from a 529 education fund into an IRA.1

Secure Act 2.0’s improvements for low-income workers

For lower-income workers, there are several new rules that can directly improve their retirement savings, including the following four:

  1. Auto enrollment and escalation in new plans. Starting in 2025, new defined-contribution plans will be required to automatically enroll participants with annual auto escalation. Such plans can increase employee participation and financial wellbeing, especially for low-income workers. (Employees can opt out, and there are exceptions for companies with 10 or fewer employees or in business for less than three years.)
  1. Plan contributions replaces saver’s credit. Lower-income employees can now receive a federal contribution to their retirement plan instead of a tax credit for their contributions. The amount is equal to half of the employee’s contributions, up to $2,000. The feature phases out as workers surpass income thresholds.2
  1. Enhances eligibility for part-time workers. Although employers can offer retirement plan access to part-time workers, Secure Act 2.0 increases the pool of employees eligible. Starting in 2025, employers can offer retirement benefits to long-term part-time employees who have worked 500 hours for two years instead of three.3
  1. Access to accounts for emergencies. Not having enough in basic savings can stifle lower-income workers trying to save for retirement — this can be a major hurdle for younger workers in particular. Under Secure Act 2.0, employees can withdraw up to $1,000 from their retirement account without paying a 10% penalty for early withdrawal. In addition, employers can now offer lower-paid employees a separate emergency savings account linked to their workplace retirement account.4

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

HUB Retirement and Private Wealth offers institutional and retirement services to for-profit and not-for- profit organizations and customized private wealth management services to individuals and families. HUB Retirement and Private Wealth employees are Registered Representatives of and offer Securities and Advisory services through various Broker Dealers and Registered Investment Advisers, which may or may not be affiliated with HUB International. Insurance services are offered through HUB International, an affiliate.

1 Forbes, “The Second Bite Of The Apple: The New Secure 2.0 Act And What It Means,” January 19, 2023.
2 K&L Gates, “SECURE 2.0 Act Legislation Includes Significant Changes to Individual Retirement Accounts,” January 21, 2023.
3 Clark Hill, “Secure Act 2.0 Finally Here,” January 6, 2023.
4 CNBC, “Secure 2.0’ clears Congress as part of omnibus appropriations bill, will bring more changes to U.S. retirement system,” December 27, 2022.