On December 29, 2022, President Biden signed the Consolidated Appropriations Act of 2023, which included the SECURE 2.0 Act of 2022. Building on the original Setting Every Community Up for Retirement Enhancement Act of 2019, this sweeping legislation makes significant changes to retirement plan rules that will affect virtually every business owner who sponsors a retirement plan. With over ninety individual provisions phasing in over the next several years, we highlight below the changes most relevant to business owners and plan sponsors in Mississippi and beyond.

Automatic Enrollment for New Plans

Perhaps the most impactful provision for business owners is the new requirement for automatic enrollment. Beginning in 2025, newly established 401(k) and 403(b) plans must automatically enroll eligible employees at a contribution rate of at least 3 percent but no more than 10 percent of compensation. The rate must automatically escalate by 1 percent per year until it reaches at least 10 percent but no more than 15 percent. Employees may still opt out, but the default shifts from non-participation to participation.^[1]

This requirement applies only to plans established after December 29, 2022. Existing plans are grandfathered. Small businesses with ten or fewer employees, businesses less than three years old, church plans, and governmental plans are also exempt. For business owners establishing new plans in 2023 or beyond, this is a critical design consideration that should be addressed with your plan administrator well before the 2025 effective date.

Increased Required Minimum Distribution Age

SECURE 2.0 further extends the age at which required minimum distributions must begin. The original SECURE Act raised the RMD age from 70½ to 72. Under SECURE 2.0, the RMD age increases to 73 beginning January 1, 2023, and will increase again to 75 beginning January 1, 2033.^[2] For business owners who are also participants in their own plans, this provides additional years of tax-deferred growth. It also means fewer mandatory distributions for older employees who continue working, which can simplify plan administration.

One important note: individuals who turned 72 in 2022 are still subject to the prior rules and must take their 2022 RMD by April 1, 2023. The new age-73 threshold applies to individuals who turn 72 after December 31, 2022.

Roth Employer Contributions

For the first time, SECURE 2.0 allows employers to make matching and nonelective contributions on a Roth (after-tax) basis. Previously, all employer contributions were required to be made on a pre-tax basis, regardless of the employee’s deferral election. This provision is effective immediately and applies to 401(k), 403(b), and governmental 457(b) plans.^[3]

The practical implications are significant. An employee who prefers Roth treatment can now receive both their own deferrals and the employer match in Roth form. For highly compensated business owners who anticipate being in a high tax bracket in retirement, this provides a new avenue for Roth accumulation. The tradeoff is that Roth employer contributions are includable in the employee’s gross income in the year of contribution, so employees need to understand the current tax impact before electing this option.

Enhanced Small Employer Plan Credits

SECURE 2.0 substantially increases the tax credits available to small employers who establish new retirement plans. The startup credit under Section 45E is increased to cover 100 percent of administrative costs for employers with up to 50 employees, up from the prior 50 percent credit. Additionally, a new credit under Section 45T provides an amount equal to a percentage of employer contributions, up to $1,000 per employee, for the first five years of the plan. The contribution credit percentage starts at 100 percent in the first two years and phases down over years three through five.^[4]

For a small business owner who has been on the fence about establishing a 401(k) plan, these enhanced credits can offset a substantial portion of both setup and ongoing contribution costs. Combined with the administrative simplicity of modern plan platforms, the economic case for offering a retirement plan has never been stronger for small Mississippi businesses.

Student Loan Matching

Beginning in 2024, employers may treat an employee’s qualified student loan payments as elective deferrals for purposes of matching contributions. In practical terms, an employee who is making student loan payments instead of 401(k) contributions can still receive the employer match based on their loan payments.^[5] This provision addresses a real concern among employers: younger employees burdened with student debt often decline to participate in retirement plans because they cannot afford both loan payments and plan contributions. By permitting the match to apply to loan payments, employers can help these employees begin building retirement savings without requiring them to contribute out of pocket.

Catch-Up Contribution Changes

SECURE 2.0 makes two notable changes to catch-up contributions. First, beginning in 2025, employees aged 60 through 63 will be eligible for a higher catch-up contribution limit equal to the greater of $10,000 or 150 percent of the regular catch-up amount. This creates a window of enhanced savings capacity for employees approaching but not yet at retirement age. Second, beginning in 2024, catch-up contributions for employees earning more than $145,000 in the prior year must be made on a Roth basis only. This Roth catch-up requirement has generated significant administrative concerns among plan sponsors and recordkeepers, and the IRS has signaled that further guidance will be forthcoming.

What Business Owners Should Do Now

The breadth of SECURE 2.0 means that virtually every business owner with a retirement plan should review their plan documents and administrative procedures in light of the new law. Several provisions are effective immediately or take effect in 2024, requiring prompt attention. Others phase in over several years, providing time to plan but also creating a compliance timeline that must be carefully tracked.

We recommend that business owners take several steps in the near term. First, contact your plan administrator or third-party administrator to discuss which SECURE 2.0 provisions apply to your plan and when. Second, review your plan document to determine whether amendments are needed. The IRS has indicated it will provide a remedial amendment period, but understanding the scope of required changes now is important. Third, evaluate whether newly available features—such as Roth employer contributions or student loan matching—align with your workforce needs and recruiting strategy. Finally, for business owners considering establishing a new plan, factor the automatic enrollment requirement and the significantly enhanced tax credits into your cost-benefit analysis.

SECURE 2.0 represents a meaningful expansion of the retirement plan landscape. Business owners who engage proactively with these changes will be best positioned to take advantage of the new planning opportunities while remaining in compliance with the evolving regulatory framework.