For many small or medium-sized business owners, retirement plans aren’t part of the daily conversation, until something changes. That moment arrived with the passage of the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022, which introduced a series of retirement plan updates designed to help employees save more. For employers, however, those changes can directly impact payroll setup, plan design, and whether plans meet federal rules if they’re overlooked.
Why Employers Are Paying Attention Now
As more SECURE 2.0 provisions move from optional to mandatory, employers must confirm that their retirement plans and payroll systems are aligned with current requirements. Failing to update plan settings or contribution rules can lead to avoidable plan errors or employee confusion.
Below, we highlight key SECURE 2.0 updates, explain their impact on your business, and outline when next steps may be needed.
Section 603: Roth Catch-Up Contributions for Higher Earners
Beginning January 1, 2026, employees classified as highly compensated who exceed the IRS income threshold will no longer be permitted to make catch-up contributions on a pre-tax basis. Instead, these catch-up contributions must be made as Roth (after-tax) contributions. If an employer’s retirement plan does not offer a Roth catch-up contribution option, affected employees will be unable to make catch-up contributions.
What does this mean in practice? If your retirement plan currently allows catch-up contributions, you may need to update your plan to include a Roth deduction option to remain compliant.
This is one of those changes that feels small but can create compliance issues if systems aren’t updated in advance. The requirement applies only to certain higher-income employees and is based on prior-year wages, so employers should confirm eligibility with their retirement plan advisor before making changes.
Section 604: Roth Employer Match and Non-Elective Contributions
SECURE 2.0 also allows employees to receive employer matching or non-elective contributions as Roth contributions, instead of traditional pre-tax dollars.
Employers may need to add a Roth Match or Roth Non-Elective contribution option to your deferred compensation plan. While this feature is optional, employees may ask for it as awareness grows—especially those focused on long-term tax planning.
Section 101: Automatic Enrollment for New Retirement Plans
If you established a new 401(k) or 403(b) plan after December 31, 2024, automatic enrollment and automatic escalation are now required. That means new plans must automatically enroll eligible employees, start contributions at a set percentage, and increase that percentage annually unless the employee opts out.
Employers setting up new plans will need to define these defaults clearly and ensure payroll systems apply them correctly from day one. Some small businesses and specific plan types are exempt from this requirement, making it especially important to confirm whether the rule applies before updating plan settings.
Section 109: Higher Catch-Up Limits for Ages 60–63
Employees between ages 60 and 63 now have higher catch-up contribution limits for certain retirement plans; currently the limit is $11,250. The good news for employers who partner with CommPayHR is that there is no action required on their part. CommPayHR updates the employer’s payroll platform to automatically reflect the new limits, ensuring contributions stay compliant. Sometimes the best update is the one you don’t have to manage yourself.
Section 117: Increased Contribution Limits for SIMPLE Plans
SECURE 2.0 also increased annual salary deferral and catch-up limits for SIMPLE IRA and SIMPLE 401(k) plans. The limits depend upon the size of the employer. These limits don’t adjust themselves automatically across all plans. Employers should review their plan setup to confirm contribution limits are configured correctly, especially before the next plan year begins.
Section 121: Starter 401(k) and Expanded Plan Options
Employers may now offer a Starter 401(k) or Safe Harbor 403(b) plan, designed to reduce administrative complexity while still offering retirement benefits. These plans include automatic enrollment and escalation, which employers must manage manually for each employee.
Section 125: Long-Term Part-Time Employee Eligibility Expansion
SECURE 2.0 expands retirement plan eligibility for certain part-time employees. Under Section 125, employees may participate in a 401(k) or 403(b) plan if they work at least 500 hours per year for two consecutive years, even if they are not considered full-time. This change is designed to give consistent part-time workers access to retirement savings opportunities that were previously unavailable to them.
What does this mean for the employer? You may need to update your plan’s eligibility rules to include long-term part-time employees who now qualify. This can affect when employees are enrolled and how payroll deductions are handled, so it’s important that your plan settings and payroll system align.
Let CommPayHR Help You Feel More Secure Dealing with SECURE 2.0
Though complex, the IRS didn’t design SECURE 2.0 to trip employers up—but without some guidance, it can easily get confusing. Between new Roth options, automatic enrollment requirements, and expanded eligibility rules, even small oversights can create compliance risks. That’s why it pays to partner with Commonwealth Payroll & HR.
Not only do we process payroll, but we also try to help you understand what’s changing, what applies to your business, and how to set up your systems correctly. As a client, your CommPayHR dedicated Customer Service & Support Specialist is just a call or email away. Contact us, and let’s start a conversation.
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