SECURE 2.0: A Closer Look at Auto Enrollment & Catch-up Contributions

Part of a series  |  SECURE 2.0 Act Insights

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The SECURE 2.0 Act enacted December 29, 2022, introduced sweeping changes to employer-sponsored retirement plans. Find out how automatic enrollment and increased catch-up contributions are helping more employees save for the future.

With nearly 55% of Americans lagging in saving for retirement, the SECURE 2.0 Act has already begun rolling out provisions to help give retirement readiness a significant boost.

Here are two examples of how the Act is changing the retirement game:

Automatic enrollment

Imagine giving employees the ability to start saving for retirement "automatically." Soon, they can.

Beginning in 2025, all new 401(k) and 403(b) plans established after the enactment of SECURE 2.0 will be required to automatically enroll new employees at an initial contribution amount between three and 10%. The amount will increase by one percentage each year until it reaches 10-15%.

Plans established before enactment will not be impacted. New companies in business for less than three years and employers with 10 or fewer workers are excluded. There are also some exceptions for small businesses, as well as church and governmental plans, so you may wish to speak to a trusted financial professional about requirements specific to your situation.

Increased catch-up contribution limits

SECURE 2.0 is also raising the catch-up limit for older employees to help fast-track their retirement savings. Right now, plan participants age 50+ can contribute an extra $7,500 per year into a 401(k) account. This amount will increase to $10,000 per year starting in 2025 for participants aged 60-63. Catch-up provisions will be indexed annually for inflation.

In addition, note that effective January 1, 2026, all catch-up contributions for participants earning more than $145,000, must be made after tax in a Roth account.

Finally, with the new legislation's introduction of starter 401(k) plans in 2024, a $1,000 catch-up contribution will be permitted for participating employees age 50+. This amount will also be adjusted annually for inflation.

The future of retirement plans

Change is here and there's more to come as we collectively work toward an accessible retirement for all Americans.

If you're still deciding on a plan for your business, connect with an ADP retirement specialist for guidance and get your questions answered.

The SECURE 2.0 Act has 90+ provisions — need help keeping up? Here's your Complete Guide to the SECURE 2.0 Act of 2022

ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan's provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor. ADPRS-20230426-4453