What SECURE 2.0 means for your next employee ben...

The SECURE 2.0 Act has changed how retirement plans operate, potentially creating new compliance risks for plan sponsors heading into their next employee benefit plan audit. Several provisions took effect in 2025 and 2026, so sponsors need to ensure their plan documents, payroll systems and recordkeeping processes align with the new requirements.

Plan sponsors should understand which provisions align with their plans, determine whether their systems and processes can support them and establish controls to identify errors before they surface during an audit. The following provisions are among the key SECURE 2.0 changes plan sponsors should address.

Mandatory Roth catch-up for high earners

Effective January 1, 2026, employees age 50 or older whose prior-year FICA wages (Box 3 of Form W-2) exceed $150,000 for 2025 must make catch-up contributions as Roth contributions. If a retirement plan does not offer a Roth deferral option, these employees cannot make catch-up contributions.

Plan sponsors should consider amending their plans to include a Roth contribution feature to avoid restricting higher-paid employees. They should also ensure payroll systems can identify affected employees and properly categorize their catch-up contributions as Roth contributions.

Enhanced catch-up contributions

Beginning January 1, 2025, participants between the ages 60 through 63 can make additional catch-up contributions. The limit was $11,250 for 2025 and is indexed for inflation after 2025, although it remains $11,250 for 2026.

Plan sponsors should ensure their payroll systems apply the increased catch-up limit to eligible participants.

Automatic enrollment and escalation for new plans

Plans established after December 29, 2022, must automatically enroll employees once they meet the plan's eligibility requirements. This requirement became effective for plan years beginning after December 31, 2024.

The initial automatic enrollment rate must be 3% but no more than 10% of compensation. After the first year, the rate increases by 1% annually until it reaches at least 10%, but no more than 15%. Employees may opt out of automatic enrollment and escalation.

Plan sponsors should ensure their plans and related systems are configured to follow these requirements.

Long-term part-time (LTPT) employee eligibility

The SECURE Act requires employers to allow certain long-term part-time employees to participate in retirement plans. For plan years beginning in 2024, an LTPT employee became eligible if they completed at least 500 hours of services in each of three consecutive years.

Beginning in 2025, the threshold was reduced to two consecutive years with at least 500 hours of service in each year. Plan sponsors should ensure payroll systems accurately track hours and monitor eligibility for part-time employees.

What to do next

Plan sponsors generally have until December 31, 2026, to formally amend plan documents to reflect these changes, although many SECURE 2.0 provisions took effect earlier. Sponsors should make required amendments on time to maintain plan qualification while ensuring their plans are already operating in accordance with applicable provisions.

SECURE 2.0 represents one of the most significant plan reforms in years, but preparing for its impact on an employee benefit plan audit comes down largely to execution. Plan sponsors should work closely with their payroll providers and recordkeepers to ensure that plan provisions are operating as intended and that systems accurately identify eligible participants, contributions and limits.

Strong oversight and internal controls can help sponsors identify compliance issues, reduce errors requiring investigation during the employee benefit plan audit and support a smoother overall process.