Once plan sponsors address the shorter-term mandatory SECURE 2.0 provisions, there are a stack of voluntary provisions to consider, and plan sponsors will need to prioritize based on their unique needs. New research from PGIM DC Solutions, which was based on a survey of 155 DC plan sponsors, finds that the top priority for 6 in 10 plan sponsors is Participant communications and engagement. With the passage of SECURE 2.0, there are new tools for plan sponsors that can support participant engagement – three are highlighted below:

Struggling with low participation or savings rates? Plan sponsors can now use small ("de minimis") financial incentives, such as gift cards, to encourage employee savings in 401(k) and 403(b) plans. For example, an employer could offer a $40 gift card for any employee who signs up for the 401(k) plan. Keep in mind that this would be a cost to the employer, and taxable for the employee.
Have an employee population with student loan debt? Employers will be permitted to make matching contributions under a 401(k) plan and 403(b) plan with respect to qualified student loan payments starting in 2024. Government employers will be permitted to make matching contributions into a 457(b) plan (or another plan) as well. This provision will be particularly beneficial for employees who struggle to make their student loan payments and contribute to their 401(k) to receive the employer match. It will allow participants to start building a retirement nest egg much sooner, while continuing to pay down their student loans. This provision could increase employer contributions (e.g., cost) and will require recordkeeper and administrative enhancements.
Roth vs. pre-tax? More Roth please. Employers can now allow employees to elect for some or all their matching and nonelective contributions (including student loan matching contributions) to be treated as Roth contributions under a 401(k), 403(b), or government 457(b) plan. For plans with vesting schedules, note that the law requires Roth matching and nonelective contributions to be 100% vested. While some DC plans may already offer the ability to convert balances from pre-tax to Roth, this provision may be of greater interest for certain employee populations where Roth is a more tax efficient vehicle for saving for retirement. Despite being allowed today, additional guidance from Treasury and the DOL is needed, and it will require recordkeeper and administrative changes, which may take time.

Related: SECURE 2.0: Mandatory and optional provisions for employers

My suggestion is that DC plan sponsors should start with the shorter-term mandatory items to ensure compliance by the applicable dates and then look to the longer-term mandatory items and voluntary provisions to determine their next best steps.

Instant Insights /

SECURE 2.0: Plan sponsors, check off mandatory provisions first, then new options

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