In addition to the provisions required to be adopted by qualified employee benefit plans under the SECURE 2.0 Act of 2022 (SECURE 2.0), the act includes certain provisions that are optional for employers to adopt in their employee benefit plan. Employers should understand what provisions are optional and determine if the adoption of those provisions would be beneficial to the participants in the plan, while also understanding the financial impact it may have on the plan sponsor.

The most impactful provisions that are optional for employers to adopt are:

• Employer matching contributions on employee student loan payments: Employers can “match” participant student loan payments with employer contributions to a retirement account. The matching calculation would be in accordance with plan provisions. This provides an additional benefit for employees who may not be able to contribute to the plan due to student loan repayments but enabling the participant to receive an employer matching contribution on those repayments.
• Employer matching contributions and nonelective contributions designated as Roth contributions: Employers can allow participants to elect for employer matching contributions and nonelective contributions to be designated as Roth contributions. Contributions designated as Roth contributions are not excludable from the employee’s income and must be 100% vested when made.
• Emergency personal expense distributions: Participants may withdraw up to $1,000 for emergency expenses and will not incur the 10% early withdrawal tax. Withdrawals up to $1,000 are allowable each plan year, and participants must be allowed to repay the withdrawal within the next three years. Certain limitations on these withdrawals are in place based on subsequent participant contributions and repayments.
• Emergency savings account: Employers may allow participants to create an emergency savings account within their 401(k) plan, which would allow employees to access the account at least one a month to cover unforeseen expenses, without incurring taxes or penalties. Participants can contribute to this account until the balance reaches $2,500. If the plan also provides for matching contributions, contributions to the emergency savings account may also be eligible for matching contributions.
• Increase in the involuntary force out limit: Plans may increase the involuntary force out amount, which was previously $5,000, to $7,000. The increase helps reduce the number of participants that are forced out of the plan due to a low balance, which decreases their overall retirement savings account. This change could increase the number of participants with account balances within the plan. Plan sponsors should evaluate this provision to determine if changing the limit will increase the likelihood of the plan becoming a large plan filer, requiring a plan audit.
• Special distributions or loans related to federally declared disasters: Participants may take a distribution up to $22,000 for qualified disaster recovery distributions and will not be subject to the 10% early withdrawal tax. These distributions may also be repaid to the plan. In addition, the loan limit is increased to the lesser of $100,000 or 100% of the participant’s account balance, for participants who experience a qualified disaster. A one-year extension on the loan repayment may also be provided.
• Repayment of distributions for birth or adoption costs: Participants may repay distributions that were taken to pay for qualified expenses related to childbirth and adoption within three years after taking the distribution.

The above is only a partial list of optional provisions employers may adopt for their plans and as previously noted, there are certain provisions that are required to be adopted. Careful consideration should be made prior to adopting these provisions to determine the impact they may have on the participants, as well as the plan sponsor, including any additional costs that may be incurred related to the adoption.

Full details of SECURE 2.0 can be accessed here.

Citrin Cooperman is here to help with any questions you may have related to these additional provisions, as well as other provisions not listed above. Please contact Jamie Lontz at jlontz@citrincooperman.com or your Citrin Cooperman advisor for more information.