SECURE Act 2.0: Everything You Need to Know


The Complete Guide to the SECURE 2.0 Act

The SECURE Act 2.0, formally known as the Setting Every Community Up for Retirement Enhancement Act of 2020, signifies a pivotal evolution in retirement planning and policy, particularly for small U.S. businesses. 

In this SECURE ACT 2.0 post, we answer the most frequently asked questions by SMB business owners, CEOs, CFOs, and HR Directors.

We look at the implications of the SECURE Act 2.0 for small businesses and examine its benefits, challenges, and the practical steps that small business owners can take to navigate this new retirement savings legislation.

Click a frequently asked question below to scroll to the answer.

What is the SECURE 2.0 Act?

The SECURE Act 2.0 is federal legislation in the United States. It serves as an extension and expansion of the original Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law in December 2019. The SECURE Act 2.0 aims to further improve retirement savings opportunities for Americans, making it easier for employers to offer retirement plans and for individuals to save for retirement. As federal legislation, its provisions and reforms apply across all states, impacting a wide range of retirement planning aspects for individuals, small businesses, and other employers nationwide.

In late 2022, a comprehensive $1.66 trillion omnibus spending bill was signed into law on December 29. The legislation provided funding for the U.S. federal government through the fiscal year ending September 2023. It also introduced new provisions for retirement plans that build upon the foundation set by the SECURE Act in 2019. 

The SECURE 2.0 Act introduces several key measures designed to improve the ability and opportunities for Americans to prepare for retirement. It simplifies the process for small businesses to establish retirement plans, introduces savings options for part-time employees, includes provisions for matching contributions for student loan repayments, and offers numerous other benefits. 

What is the rationale for the SECURE 2.0 Act legislation?

Some employers do not offer formal retirement plans to employees due to perceived costs, complexity, fear of liability, and concern about lack of demand. Yet a 2022 AARP study found that nearly 57 million people—48 percent of American private sector employees between the ages of 18 to 64— do not have access to a retirement plan at their workplace. The impact is significant in smaller companies where most employees lack access to a plan. In companies with less than 10 employees, 78 percent of workers have no formal retirement plan, while 65 percent of workers in companies with 10 to 24 employees have no retirement plan.

What are the most important provisions in the legislation that impact small business?

There are 72 provisions in the SECURE Act 2.0 legislation. Here are a few important ones to make note of.  

For employers:

  1. Auto-enrollment will be required for all plans launching in 2024 and beyond.

  2. Additional tax credits help small businesses offset the cost of offering a retirement plan.

  3. Employees can be offered small financial incentives to sign up for retirement plans.

For employees:

  1. More part-time workers can access retirement accounts.

  2. Increased access to retirement savings with penalty-free withdrawals during emergencies.

  3. Student loan repayment matching.4

What are the new tax credits available for SMBs under the SECURE Act 2.0, and how can my business qualify?

The SECURE Act 2.0, enacted to enhance retirement savings across the United States, introduces significant incentives for small to medium-sized businesses (SMBs) to establish and maintain retirement plans for their employees. This federal legislation aims to lower the financial barriers and administrative burdens for SMBs, encouraging broader participation in retirement savings programs. Here’s a summary of the key tax credits available under the SECURE Act 2.0 for SMBs and how businesses can qualify:

Increased Tax Credit for Plan Startup Costs

Enhancement: The tax credit for starting a new retirement plan has increased substantially to encourage SMBs to offer retirement benefits. Previously capped at $500, the new structure allows for a credit of the greater of $500 or a maximum of $5,000, calculated based on $250 for each non-highly compensated employee eligible to participate, incentivizing the set up of new plans.

Businesses with 100 or fewer employees who received at least $5,000 in compensation in the previous year and are initiating a new retirement plan.

Small Employer Automatic Enrollment Credit

Introduction: A new $500 tax credit has been introduced for SMBs that add automatic enrollment to their retirement plans, aiming to boost employee participation rates.

: Available to all SMBs that implement automatic enrollment in their new or existing retirement plans.

Three-Year Tax Credit for Joining a Multi-Employer Plan

Incentive: This credit is designed to reduce costs for SMBs by encouraging them to join Multi-Employer Plans (MEPs), which allows them to share administrative responsibilities and costs.

Eligibility: Small businesses participating in a MEP are eligible for this additional credit, highlighting the Act’s support for collaborative retirement savings efforts.

Qualification and Claim Process

Businesses must meet specific criteria related to their size and the retirement plan actions they are taking, such as starting a new plan or adding automatic enrollment. Appropriate forms must be filed with the IRS tax return to claim these credits. SMBs are advised to consult with tax professionals to ensure compliance and optimal benefit from these provisions, reinforcing the SECURE Act 2.0’s goal of expanding retirement plan accessibility and participation among American workers.

What are the key features of the SECURE 2.0 Act legislation that most people should be aware of?


There are five key takeaways:

1) Age increase for RMDs

For people contributing to an individual retirement account (IRA) or workplace retirement plans like a 401(k), there exists a mandate to withdraw a minimum amount annually once reaching a specific age. This withdrawal is known as a required minimum distribution (RMD). Before the enactment of the SECURE 2.0 Act, the age at which RMDs began was 72. However, the legislation has updated this, pushing the starting age from 72 to 73 as of January 1, 2023, and plans to further raise it to 75 by 2033.


The significance of this change lies in its potential benefit for retirees who do not have immediate needs for their retirement funds. With the adjustment, individuals have the opportunity to keep their savings invested for a longer duration, thereby possibly enhancing the growth of their retirement funds.

2) Expansion of auto-enrollment and auto-escalation for retirement plans

Starting in 2024, new retirement plans will be required to automatically enroll their workers in a 401(k) or 403(b) plan (similar to a 401(k), but for certain public school or nonprofit employees). 

The minimum requirement is to automatically put at least three percent of employees’ paychecks and no more than 10 percent into their retirement accounts. There’s also a provision that requires that the contribution automatically increase by one percent  every year up to at least 10 percent and no more than 15 percent. Employees can opt out or change their contribution rate on their own. This matters because people are more likely to save for retirement if they’re automatically enrolled in their plan.

3) Enhanced Access to Emergency Funds in 401(k) Plans

Starting in 2024, provisions within 401(k) plans will enable participants to withdraw funds for emergency situations without facing the customary penalties. This adjustment introduces two key provisions:

First, an exemption from the 10 percent early withdrawal tax on distributions made for urgent, unforeseen personal or family emergencies, subject to specific criteria. Secondly, plans may offer participants the option to contribute to an emergency savings account connected to their retirement account up to a limit of $2,500.

The importance of these changes lies in providing individuals with greater flexibility and options for accessing their retirement funds in case of emergencies, without the burden of steep penalties for withdrawals before age 59½. This aims to support financial stability by allowing for emergency use while still preserving the long-term intent of retirement savings.

4) Enhanced Saver’s Credit for lower- and middle-income workers 

By 2027, the existing Saver’s Credit, which currently offers a tax credit for contributions to individual retirement accounts (IRAs), workplace retirement plans, and Achieving a Better Life Experience (ABLE) accounts, will transform into a direct matching contribution from the federal government for workers with lower and middle incomes.


The significance of this transformation lies in its simplification of the benefit process for eligible taxpayers. Rather than having to claim the Saver’s Credit on their tax returns, the matching funds are directly deposited into their retirement accounts, streamlining the process and ensuring that the benefit directly supports their retirement savings efforts.

What are the SECURE 2.0 Act small business tax incentives?

Enhances tax incentives for initiating plans: Small enterprises with a workforce of up to 50 can now access a tax credit that fully offsets the costs of initiating a plan, a significant increase from the previous 50% coverage, with an annual cap of $5,000 over three years, summing up to $15,000. Businesses employing 51 to 100 individuals continue to be eligible for the initial SECURE Act tax benefits, which cover 50 percent of the administrative expenses and capped at $5,000 yearly for three years.

Additional credits for employer contributions: Small enterprises employing up to 50 individuals are now eligible for a novel tax credit that is a fraction of the employer’s contributions, with a maximum of $1,000 per employee earning below $100,000 annually. Businesses with a staff count of 51 to 100 are eligible for a graduated credit system.

Broadens the scope of eligibility for the start-up tax credit
: The availability of start-up tax credits now includes employers who join pre-existing multiple employer plans within the year, expanding beyond the initial requirement of joining a new plan exclusively.


Preserves the auto-enrollment tax incentive: The existing tax credit, amounting to $500 annually for the initial three years upon adopting auto-enrollment, remains in effect.

The SECURE Act 2.0 includes provisions that indirectly support the proliferation of state-sponsored retirement plans and creates a more favorable environment for them.  The retirement savings plans established and operated by individual states provide retirement savings options primarily to workers who do not have access to employer-sponsored retirement plans.

State-sponsored retirement plans are just one option for companies looking to offer retirement benefits to their employees in light of the SECURE Act 2.0.

Companies can create their own employer-sponsored retirement plans, including:

  • 401(k) Plans
  • Simplified Employee Pension Plans and Savings Incentive Match Plans for Employees (SIMPLE) IRAs. 
  • Pooled Employer Plans (PEPs)

How do state mandates integrate with federal legislation?

While the SECURE Act 2.0 primarily outlines federal-level changes to retirement savings rules, states play a complementary role, particularly in the context of retirement plan mandates for employers.

States are involved in providing mandates related to retirement savings through the establishment and management of state-sponsored retirement savings programs. These programs are designed to ensure that employees, especially those working for small businesses that might not offer retirement plans, have access to retirement savings options. The involvement of states in these mandates serves two main purposes:

1. Filling the Coverage Gap: Many employees in the United States lack access to employer-sponsored retirement savings plans. State mandates aim to fill this gap by requiring or encouraging employers to participate in state-run retirement programs if they do not offer their own plans. This ensures broader coverage and helps more workers start saving for retirement.

2. Supporting the Goals of the SECURE Act 2.0: The SECURE Act 2.0 aims to increase retirement savings and participation rates across the board. By implementing these state mandates, states support the federal initiative by providing additional avenues for savings. For instance, the Act encourages small businesses to set up retirement savings plans through tax credits and other incentives. States complement these efforts by offering easily accessible, low-cost options for businesses and employees to participate in retirement savings.

3. State mandates: Part of a broader strategy

State mandates were not created as a direct requirement of the SECURE Act 2.0 but as a part of a broader strategy to enhance Americans’ retirement security. They act based on their legislative frameworks, creating programs like auto-IRA (Individual Retirement Account) programs, where employees are automatically enrolled in IRAs unless they opt-out. OregonSaves, CaliforniaSavers, and Illinois Secure Choice are examples of such state-sponsored retirement savings programs.

The “why” behind states’ involvement underscores a commitment to increasing financial security for retirees, recognizing that a secure retirement is foundational to the overall economic well-being of its citizens. 

By mandating participation in retirement savings plans, states aim to encourage a culture of savings, reduce the number of people reliant on public assistance in retirement, and complement federal efforts to improve retirement readiness among the workforce

Are there any new tax credits for small businesses under the Secure Act 2.0?

Yes, the SECURE Act 2.0 introduced several new and enhanced tax credits aimed at small businesses to encourage them to start and maintain retirement plans for their employees.

Here are the key tax credits you should be aware of:

1. Increased Tax Credits for Plan Startup Costs: The Secure Act 2.0 significantly increases the tax credits available to small businesses for starting a new retirement plan. Previously, the tax credit was capped at $500 per year. Under the Secure Act 2.0, the credit is increased to cover 100% of the startup costs for businesses with up to 50 employees, up to a maximum of $5,000 per year for the first three years of the plan. This is intended to significantly reduce the financial burden on small businesses for establishing a retirement plan.

2. Credit for Small Employer Pension Plan Startup Costs: For small employers (typically those with up to 100 employees), the Secure Act 2.0 offers a three-year tax credit to offset the costs of establishing a retirement plan. The credit amount can be up to $5,000 per year, calculated as 50% of the eligible startup costs, with the potential increase for employers with 50 or fewer employees.

3. Small Employer Automatic Enrollment Credit: An additional tax credit has been introduced to encourage small businesses to include automatic enrollment features in their retirement plans. This new credit is $500 per year for up to three years and is available to companies that add automatic enrollment to their new or existing plans. This credit is in addition to any other plan startup credits.

4. Tax Credits for Joining a Multiple Employer Plan (MEP): The SECURE Act 2.0 also encourages small businesses to participate in MEPs or Pooled Employer Plans (PEPs) by making it more financially attractive. These arrangements can help small businesses to offer retirement benefits by pooling resources and reducing administrative burdens.

5. Credits for Adding Eligibility for Part-Time Workers: Although not a direct credit, the Secure Act 2.0 mandates that part-time workers who meet certain criteria must be allowed to participate in 401(k) plans. While this provision doesn’t directly create a new tax credit, it’s part of the broader initiative to expand retirement plan coverage, which may indirectly affect small businesses’ approach to retirement benefits and potentially influence their tax planning related to retirement contributions.

How can small business owners take advantage of the Secure Act 2.0’s provisions for multiple employer plans (MEPs)?

Small business owners can leverage the Secure Act 2.0’s provisions for Multiple Employer Plans (MEPs) to offer retirement benefits efficiently and cost-effectively. MEPs allow small businesses to pool resources, reducing individual costs and administrative burdens associated with offering retirement plans. The benefits include access to better plan features, reduced fiduciary liability since MEPs are managed by a named fiduciary, and potentially lower administrative costs.

To take advantage of MEPs, small business owners should first understand the benefits and evaluate different MEP options available, considering factors such as investment options, fees, and administrative support. Consulting with a plan provider (like  can help make an informed decision. Understanding the eligibility requirements and ongoing obligations of joining an MEP is crucial, including providing accurate employee data.

Joining an existing MEP involves entering into a contractual agreement that outlines the responsibilities of both parties. Alternatively, businesses can consider establishing a new MEP, especially if seeking to collaborate with businesses within the same industry or network. This requires guidance from legal and financial advisors to navigate the establishment process, costs, and legal requirements.

Educating employees about the retirement plan’s benefits is essential for encouraging participation and maximizing the plan’s value. Finally, staying informed about regulatory changes and best practices for MEP management ensures compliance and optimizes the benefits of participation. Small business owners are encouraged to seek professional advice to explore their options and ensure that joining or establishing an MEP aligns with their business goals and employee needs.

What are the deadlines and transition periods for implementing changes under the Secure Act 2.0?

Here are some of the key deadlines and transition periods associated with major changes under the SECURE Act 2.0:

  1. Increased Age for Required Minimum Distributions (RMDs): The age for starting RMDs from retirement accounts was increased from 72 to 73 for individuals turning 72 after December 31, 2022, and will further increase to 75 for those turning 74 after December 31, 2032.

  2. Changes to Catch-Up Contributions: Starting in 2024, individuals aged 50 and older can make higher catch-up contributions to retirement plans. Additionally, for individuals aged 60-63, there’s an even higher catch-up limit set to be effective in 2025, subject to certain limits and conditions.

  3. Expansion of Automatic Enrollment: The act requires new 401(k) and 403(b) plans to automatically enroll participants upon becoming eligible, with the ability for employees to opt out. This provision applies to plans established after December 29, 2022.

  4. Tax Credits for Small Businesses: Enhanced tax credits for small businesses starting new retirement plans and for those adding auto-enrollment features took effect immediately in 2023.

  5. Student Loan Payments as Retirement Contributions: Employers can offer matching contributions to retirement plans based on employees’ student loan payments starting in 2024.

  6. Long-Term, Part-Time Worker Participation: The act builds on previous legislation to lower the service requirements for long-term, part-time workers to participate in 401(k) plans, expanding eligibility in phases starting in 2021 with full implementation by 2024.

  7. Penalty-Free Withdrawals for Emergencies: Certain provisions allowing penalty-free withdrawals from retirement accounts for emergencies and special circumstances have specific effective dates, often immediately upon enactment or starting in 2023.