Understanding SECURE Act Retirement Plan Updates

Signed into law in December 2019, the Setting Every Community Up for Retirement Enhancement (Secure) Act, expanded retirement plan access and incentives for employers. Subsequent updates, including Secure Act 2.0 (part of the 2023 Consolidated Appropriations Act”), outlined additional requirements and tax credits.

But what do the changes mean for employers?

1. The Secure Act expanded tax credits.

   The federal government already provides tax incentives for employers to create and maintain retirement plans, but the SECURE Act expanded the credits available.
   • Retirement Plan Startup Costs Tax Credit
     Eligible employers may be able to claim a tax credit of up to $5,000 for three years for the ordinary and necessary costs of starting a SEP, SIMPLE IRA or qualified plan such as a 401(k). For employers with 50 or fewer employees who received at least $5,000 in compensation, the credit may cover up to 100% of eligible startup costs, subject to statutory caps.1
     
     An additional startup cost credit, up to $1,000 per employee, is available to offset employers’ qualifying contributions.2 The employer-contribution credit phases down over time and does not apply to employees earning more than a specified compensation amount.
     
     
   • Automatic Enrollment Tax Credit
     The act also created a new tax credit for employers who start 401(k) plans that include automatic enrollment provisions. Automatic enrollment enables employers to register employees for a retirement plan and deduct contributions from their wages unless the employee opts out or elects to contribute a different amount.
     
     Eligible employers that add an auto-enrollment feature may claim a $500 annual tax credit for three years.3 In addition, for many new plans, employers must offer automatic enrollment for plan years beginning after December 31, 2024, unless an exception applies.
     
     

2. It’s easier to offer retirement plans.

   Multiple Employer Plans (MEPs), including Pooled Employer Plans (PEPs), can make it easier for small businesses to offer retirement benefits. MEPs and PEPs allow two or more unrelated employers to participate in a single plan structure.4
   
   Before the SECURE Act, employers could only participate in an MEP if they shared a common economic interest, such as members within a professional or trade association. The SECURE Act allows completely unrelated businesses to participate in an MEP and eliminates the IRS's "one bad apple" rule, which stipulated that if one employer in the MEP did not meet qualification requirements the entire MEP could be disqualified.
   
   The change makes it easier for small business owners who haven't yet established a retirement plan to join an MEP.
   
   

3. 401(k) participation rules changed for long-term, part-time employees.

   Prior to the SECURE Act, if an employee worked less than 1,000 hours per year, they were ineligible to participate in their employer's 401(k) plan.
   
   The SECURE Act added protections for long-term, part-time employees who would not otherwise meet a plan’s standard eligibility requirements. For plan years beginning after 2024, a 401(k) plan generally can’t require those employees to complete more than two consecutive 12-month periods with at least 500 hours of service as a condition for making elective deferrals. A 401(k) plan also can’t require more than one year of service as a condition for making elective deferrals.5 In addition, companies don’t have to offer employer matching or profit sharing to these employees.
   
   This provision benefits employees who might not have access to an employer-sponsored plan. However, it creates a potential administrative burden on employers. Adding long-term, part-time employees may affect whether a plan still qualifies as a small plan for Form 5500 filing purposes or remains exempt from the annual audit requirement.6 Companies might exceed the 100-participant threshold for eliminating audits, increasing compliance costs.
   
   

4. Employers can offer Roth options for high earners.

   In 2026, small businesses can offer Roth options in their retirement plans for high earners. This change ensures that after-tax contributions — especially for catch up purposes — are available to employees who exceed certain income thresholds, reflecting a shift toward more flexibility and tax diversification in retirement savings. Adding Roth options will help your employees manage future tax liabilities and align their retirement strategy with IRS regulations.
   
   

5. The retirement plan setup deadline is April 15 of the following year.

   The SECURE Act grants business owners more time to set up a retirement plan and make tax-deductible contributions. Under the previous law, an employer had to set up the plan by December 31 in order to deduct contributions to the plan on that year's tax return. The SECURE Act extended that cutoff to April 15, the following year, including extensions. This flexibility applies primarily to employer contributions; employee salary deferrals must be elected before year-end.
   
   This change allows companies looking to reduce their tax liability to start a retirement plan for the previous calendar year before filing their tax return for that year. For example, a business that decides after year-end to establish a qualified retirement plan may still be able to do so by its tax-filing deadline, including extensions, and make deductible contributions for the prior tax year, depending on the type of plan and applicable rules.
   
   Under the old guidelines, a company reviewing their year-to-date financials in December might not have enough time to set up a plan and make tax-deductible contributions to reduce their tax bill by the end of the year. Extending the deadline to the time that the company's tax return is due gives business owners considering offering an employee retirement plan more time to decide, as well as to reduce their taxable income.
   
   

6. Employees must receive one paper benefit statement per year.

   Businesses must provide at least one paper benefit statement per year for defined contribution plans, such as 401(k)s, to ensure that all participants have access to clear, tangible information about their retirement benefits.
   
   This requirement will accommodate employees who may not have reliable access to electronic communications or who prefer traditional paper statements. Employees who can receive electronic statements may opt to do so.
   
   Employers must adopt SECURE 2.0 plan amendments by December 31, 2026, although different deadlines may apply depending on the type of plan.7 Effective dates vary by provision, plan year and tax year. So, employers should review current IRS and Department of Labor guidance before making plan changes.

Need information on starting or changing a retirement plan?

If you’d like to start a retirement plan or change your existing plan, including Secure Act benefits, Synovus Retirement Plan Services can help. We work with top brokers, offer expert advice on plan components that will meet the requirements of regulators, and can connect you with a strategy that is the right fit for your employees.