The open enrollment season for employee benefits is underway at many companies, and employees may be seeing changes this year thanks to the SECURE 2.0 Act.
The
"Any new plan that's established now must include an automatic enrollment provision, and that really drives behavior for employees to be automatically enrolled," said Ron Ulrich, vice president of product consulting and compliance at ADP Retirement Services. "The path of least resistance is to do nothing, and that's what most people take."
Other changes involve increased catchup contributions to Roth plans as well as penalty-free withdrawals of up to $1,000 per year for emergency expenses. "There are some new emergency expense withdrawals that are available now," said Ulrich. "Those kinds of things may get employees to start saving for retirement."
Employees can benefit from additional contributions from their employers. "If they need that money in an emergency, or if they can't afford to save because they're paying off student loans, there's now an opportunity for employers to make contributions to retirement planning on their behalf as a matching contribution to get them started for retirement," said Ulrich. "It's all about getting employees engaged with the retirement program and getting them started."
Financial wellness
Financial wellness is important to employees, and 71% of large businesses say offering financial wellness benefits is important to attract and retain employees, according to ADP's Market Pulse Survey, which polled more than 2,300 business owners, HR and payroll leaders from companies of all sizes. The survey found retirement benefits are extremely important, with 81% of large organizations saying retirement benefits are important to attract employees, compared to 78% for medical. For small and midsized businesses, medical ranked at the top of the list.
More than 60% of businesses of all sizes say health reimbursement arrangements (such as health savings accounts) are important to attract employees, but only 17% of small businesses and 36% of midsized businesses currently offer them. The top nontraditional benefits that organizations believe will attract employees are paid family and medical leave, followed by mental health counseling.
"Based on a lot of the studies that we've seen, there was a lot of stress in the workplace with Americans over finances," said Jason Parese, senior director of education for ADP Retirement Services. "There's a lot of reasons behind that, and it's really no surprise that financial stress shows up at work. It can impact things like focus and productivity. Absenteeism can have significant effects on the employer itself and the work that gets done. Employees are really looking to their employer for help, and employers really should work with their providers to provide educational resources for the employees as part of the open enrollment season. It's the perfect time. You've got the employees' attention while they're reviewing their overall benefits for the new year."
He is seeing more of a trend toward the use of benefit fairs during open enrollment. "That seems to be very popular this season," said Parese. "We've seen many employers use this as an opportunity to create more awareness around the retirement plan in conjunction with their other benefits, all at the same time. It's mainly been done with a lot of our larger clients. However, there's definitely an opportunity to promote those benefit offerings for businesses of all sizes. Some are using virtual platforms for efficiency as well."
The automatic enrollment provisions of the SECURE Act 2.0 are helping drive more participation in retirement plans, but employers and employees still need education about the benefits. "The opportunity definitely still exists to provide more consistent education in hopes of reducing the number of employees that consider opting out of those automatic enrollment plans," said Parese.
Trump Accounts
The recently passed One Big Beautiful Bill Act doesn't contain as many retirement-related provisions, aside from a few provisions for Roth accounts, although it does set up a new form of savings for newborns and young children known as
"The basics of Trump Accounts under OBBBA are a new savings account for children born between Jan. 1, 2025, and Dec. 31, 2028, who are U.S. citizens and have a Social Security number," said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. "Such accounts could qualify for a $1,000 initial contribution from the government and other contributions up to $5,000 per year from parents, other family and friends, as well as up to $2,500 per year from employers. The accounts would grow until age 18 and could then be converted into an IRA. Investments were limited to index funds such as funds tied to the S&P 500 Index. Initially it was reported that the accounts could not be set up until Jan. 1, 2026; however, subsequent guidance set the date at July 4, 2026, for when the first contributions could be made, with the ability to file the form to set up the account, Form 4547, earlier, as soon as the draft form is finalized. The 2026 date for the first contributions means that up to $5,000 in contributions cannot be made for 2025."
The new Trump Accounts will also function as savings vehicles, for education or even retirement.
"It is the $1,000 from the federal government and these potential contributions from other governmental entities or charities that make these Trump Accounts more attractive than an IRA, as well as the lack of the IRA's earned income requirement," said Luscombe. "The more limited investment options for Trump Accounts probably still leave them attractive. It is not yet clear how many more contributions from state and local governments and charities might be forthcoming. While the accounts must initially be set up with the federal government, it appears that they can at some point be transferred to banks or other financial institutions. It is expected that the final Form 4547 might be available in time to file it with the 2025 tax return."
Looking ahead
Employers will need to look at the various options created by the changes from recent legislation.
"It's about the employer taking a look at their workforce and trying to figure out what benefits approach works right for their workforce, and many times it's about balancing the options that are available," said Ulrich. "There are so many different options that employees are going through now during open enrollment, whether it's health care, savings accounts, emergency savings, HSA plans and insurance costs, and it's about financial wellness."
Employees need help with making the right choices. "We see a lot of employees asking for more support around budgeting and debt management, some of the blocking and tackling, a little bit of the basics around overall financial planning," said Parese. "That helps to get moving in the right direction and remove some of the barriers that otherwise might exist for someone to enroll in retirement planning."
There could be further changes ahead. President Trump signed an
"The landscape for retirement plan investment and defined plan contributions is changing," said Ulrich. "The executive order basically put a kind of timeframe on other government agencies — the Department of Labor and the Securities and Exchange Commission, specifically — to come up with an evaluation of recommendations about how to make alternative investments, which could be private equity, private credit, real estate. Those types of investments aren't available to your average, regular, everyday 401(k) investor. Those haven't been part of a typical investment lineup historically, because there's challenges with liquidity and validations of those that don't really fit into the way a traditional defined contribution account plan works."
He doubts that cryptocurrency funds will be offered as part of the mix because of the fiduciary duty of plan sponsors to guard against the risk of large losses. However, expanding the range of retirement planning options seems to be a rare area of agreement in Congress.
"There continues to be bipartisan support for continued enhancement of the retirement system," said Ulrich. "There's potential tax benefits for nonprofit employers that are out there."
That could include lowering the eligibility for enrolling in a retirement plan from 21 to 18, as well as offering a federal retirement program that would cover employees if they don't have a private program, in addition to Social Security.
