Retirement Planning

SECURE 2.0 Offers Promise For Small Retirement Plans And Participants

SECURE 2.0 provisions, such as broadened auto-escalation and employer matching rules, are likely to make it easier for small plans to enhance retirement benefits to employees

A new report from Cerulli Associates helps readers stay on top of the latest product, marketing, distribution, sales, platform, and regulatory trends in the U.S. retirement marketplace.

March 29, 2023, BOSTON—The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act has numerous, significant implications for defined contribution (DC) plan sponsors, advisors, participants, and providers, according to the latest Cerulli Edge—U.S. Retirement Edition. Provisions enacted aim to further incentivize employers to offer workplace retirement plans, promote employee retirement plan participation, and encourage stronger contribution activity.

New 401(k) and 403(b) plans will now be required to auto-enroll their employees—a feature already common among mega, large, and mid-sized 401(k) plans but much less prevalent in the micro and small plan asset segments. Fewer than one-quarter of small and micro 401(k) plans offer auto-enrollment, while more than half of large and mega plans offer it. “While this enrollment will be mandatory, individuals will have the ability to opt out if they choose,” remarks David Kennedy, senior analyst. “It will provide participants with an easier path to savings, especially among new 401(k) and 403(b) plans, which, in most cases, will be started by smaller organizations,” he adds.

Student Loan Debt

Further, for individuals making qualifying student loan payments, employers will be able to provide matching contributions to their 401(k) accounts. This benefit aids workers who may feel burdened by having to choose between saving for retirement and paying down their student loans. Cerulli finds more than half of participants under age 40 contribute 6% or less of their income to their 401(k)s. Student loan debt is the top source of financial stress for 17% of participants in their 20s and for 12% of participants in their 30s.

“The cumulative impact of student loan obligations on retirement savings for those saddled with debt can be significant,” says Kennedy. “Recordkeepers that opt to offer this feature should illustrate to their plan sponsor clients how matching contributions for student loan repayments can potentially enhance the financial wellbeing of their employees,” he adds.

Planning For The Unforeseen

Plan sponsors will also be able to offer emergency savings accounts to employees and make matching contributions under the new provisions of SECURE 2.0. “This feature could make it easier for employers to help workers better plan for unforeseen events,” states Kennedy. Currently, only 18% of recordkeepers either offer an emergency savings sidecar account themselves or partner with a third party to provide one. But with SECURE 2.0, Cerulli anticipates more recordkeepers will make this functionality available on their platforms in the coming months and years.




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Headquartered in Boston with fully staffed offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.