Key Takeaways
Employers are increasingly adopting provisions from SECURE 2.0, a federal retirement law passed in 2022, a recent survey found.One of the most popular rules that employers have incorporated is self-certification for 401(k) hardship withdrawals, which makes it easier for people to access their money in emergencies.The law allows matching contributions on a Roth basis, meaning workers pay taxes upfront and can let their money grow tax-free over time, although fewer employers have adopted it.Nearly 40% of employers adopted a higher balance threshold of $7,000 required to force former 401(k) participants out of the plan.
Saving for for your retirement may get easier in 2025 as an increasing number of employers are adopting provisions of SECURE 2.0, a federal retirement law passed in 2022, a recent survey found.
According to a survey of employers by Alight Solutions, a retirement record-keeper, many employers either have already incorporated or intend to adopt changes enacted by the law to their 401(k) plans this year.
These include a higher threshold to be forced out of a plan after leaving an employer, making it easier for workers to take hardship withdrawals from their 401(k)s, and offering after-tax matching contributions in 401(k)s.
Depending on your employer, these benefits may apply to you.
Hardship Withdrawals Could Get Simpler
Previously, when workers wanted to tap their 401(k) early without incurring a penalty, they would have to demonstrate “heavy and immediate financial need” by providing documentation to their plan sponsor, according to Michael Espinosa, president of retirement services at TrueNorth Wealth.
Now, employers can provide a self-certification option for early withdrawal, allowing workers to certify that they need to take a 401(k) distribution without going through the hassle of providing documents such as unpaid medical bills.
“It makes the process a lot quicker, for those who have an emergency, to get the money out of their 401(k),” Espinosa said.
In the Alight survey, hardship self-certification was one of the most widely adopted SECURE 2.0 rules, with 42% of employers saying they’ve already incorporated it. An additional 28% said they were “definitely” or “likely” to add it, and of that group, nearly 60% planned to include it in their plan in 2025.
Joe Petry, a certified financial planner (CFP) and founder of Mayfair Financial, notes that while self-certification may make it easier for people to secure money in emergencies, people should still exercise caution when taking hardship withdrawals.
“There’s a reason you can’t take money out [of a 401(k)] before age 59 ½ without penalties,” Petry said. “Once you’re retired, you won’t have a lot of other income options.”
After-Tax Employer Match Contributions
If you receive a 401(k) matching contribution from your employer, it’s probably on a pretax basis, meaning you won’t pay tax on those contributions un