Key Takeaways
- Prior to the SECURE Act 2.0 the only financial incentive for a participant to make a deferral was a matching contribution.
- However, the new law permits “de minimus” non-cash incentives for beginning participation or increasing deferrals, so long as the incentives are not paid for by the plan.
- This change will allow plan sponsors to use gamification to encourage eligible employees to defer into a plan or to increase deferrals.
The President signed the Consolidated Appropriations Act, which included SECURE Act 2.0, on December 29, 2022.
SECURE Act 2.0 has over 90 provisions, some major and some minor; some mandatory and some optional; some retroactively effective and some that won’t be effective for years to come. One difference between the SECURE Act 2.0 and previous retirement plan laws is that many of 2.0’s provisions are optional…that is, plan sponsors are not required to adopt the provisions, but can if they decide that the change will help their plans and participants. This series discusses the provisions that are likely to be the most impactful, either as options or as required changes.
This article discusses a new provision to allow small financial incentives for participants to encourage them to make deferrals to a plan. The provision is already effective, so plan sponsors can, if they want, implement the use of these incentives now.
