Published May 20, 2026.
The SECURE 2.0 Act was signed into law in late 2022, but its operative provisions were staggered across a four-year rollout. 2025 was the year the biggest provisions hit, and a second wave of effects continues to shape what small businesses owe, what they must offer, and what their employees can save in 2026. If you sponsor a 401(k), you are running into them this year. If you have not started a 401(k) but are considering one, the rules you have to follow are now meaningfully different from what they were in 2022.
This is a small-business owner's read on what changed, what it means in practice, and where the rules will actually trip you up in 2026. Published May 20, 2026. The underlying law is the SECURE 2.0 Act of 2022, enacted as Division T of the Consolidated Appropriations Act 2023; the operative auto-enrollment provision is codified at Internal Revenue Code Section 414A.
Mandatory auto-enrollment for new 401(k) plans
This is the headline change and the one most owners misread. Effective for plan years beginning after December 31, 2024, any 401(k) or 403(b) plan established after December 29, 2022 (the date SECURE 2.0 was enacted) must include an eligible automatic contribution arrangement (EACA). In plain English: new plans now have to auto-enroll eligible employees by default, with automatic escalation.
The required design under IRC Section 414A:
- Initial automatic deferral: at least 3% of compensation, capped at 10%.
- Automatic escalation: at least 1% per year, until the deferral reaches at least 10% and no more than 15%.
- Employee opt-out: employees can affirmatively opt out, change the rate, or withdraw contributions within 90 days under permissible withdrawal rules.
- Default investment: typically a Qualified Default Investment Alternative (QDIA) — usually a target-date fund.
Exemptions: this rule does not apply to plans that existed before December 29, 2022 (grandfathered), businesses in operation less than three years, employers with 10 or fewer employees, church plans, or governmental plans. If you are reading this in 2026 and considering starting your first 401(k), the auto-enrollment rules apply to you the moment you set it up — there is no longer a way to start a "vanilla" 401(k) without them.
What this means operationally: your payroll provider, plan administrator, or fractional CFO needs to confirm the plan documents include auto-enrollment, that payroll is correctly applying the default 3% deferral to new hires, that escalations are running annually on the right date, and that the QDIA is documented. Plans that look fine on paper but where payroll quietly forgot to enroll the last three new hires are an ERISA correction project nobody wants.
"Super" catch-up contributions for ages 60–63
SECURE 2.0 created a higher catch-up contribution limit for participants in a specific age window. Starting January 1, 2025, employees aged 60, 61, 62, and 63 can contribute a higher catch-up amount to their 401(k), 403(b), or governmental 457(b) plan — the greater of $10,000 or 150% of the regular catch-up limit (indexed for inflation).
For 2026, the practical numbers (as published by the IRS in late 2025):
| Age | Regular 401(k) limit (employee deferral) | Catch-up | Total possible |
|---|---|---|---|
| Under 50 | $23,500 (subject to 2026 inflation adjustment) | $0 | $23,500 |
| 50–59 and 64+ | $23,500 | $7,500 (standard catch-up) | $31,000 |
| 60, 61, 62, 63 | $23,500 | ~$11,250 (super catch-up) | ~$34,750 |
Verify exact 2026 dollar figures against the IRS retirement plan limits notice (typically released in November) at irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits. The 401(k) catch-up reverts back to the standard $7,500 (indexed) when the participant turns 64.
Owners in their early 60s running an S-corp should pay attention: the additional ~$3,750 of pre-tax space, applied for four years, is meaningful retirement savings at a stage where most owners are also taking the largest paychecks of their career.
Roth-only catch-up for high earners
This is the rule that has caused the most plan-administration pain, and the one with the most delayed implementation. SECURE 2.0 originally required that catch-up contributions made by employees earning more than $145,000 (indexed) in FICA wages in the prior year be made on a Roth (after-tax) basis only, not pre-tax.
The IRS provided a two-year administrative transition period in Notice 2023-62, delaying enforcement until January 1, 2026. As of 2026, the rule is operative. If your plan does not offer a Roth option, your high-earning employees aged 50+ may not make catch-up contributions at all once that wage threshold is hit.
What this requires from a plan sponsor:
- Plan documents must permit Roth catch-up contributions
- Payroll must identify employees whose prior-year FICA wages exceeded the threshold
- The system must reclassify their catch-up contributions to Roth automatically
- W-2 reporting and 1099-R reporting must handle the after-tax dollar correctly
If you sponsor a plan and have any employees in this band (any salaried professional north of $145K including the owner-employee), this is something to verify with your plan administrator in writing before year-end 2026. It is not a do-it-yourself adjustment.
Starter 401(k) — the lighter-touch option
Effective for plan years beginning after December 31, 2023, SECURE 2.0 created a new "starter 401(k)" plan type aimed at employers who have not previously sponsored a plan. The starter 401(k) is essentially a low-cost, low-administrative-burden alternative:
- Employee-only contributions (no employer match required)
- Contribution limits set at the IRA limit ($7,000 in 2025, indexed; $1,000 catch-up)
- All employees automatically enrolled, default rate 3%–15%
- No nondiscrimination testing — the plan is deemed compliant
- No top-heavy testing
For a small employer that wants to offer a retirement benefit without the full-fat 401(k) compliance burden — Form 5500 filings, nondiscrimination testing, fidelity bonds, plan auditor work above 100 participants — the starter 401(k) is a real option. The trade-off is lower contribution limits, no match, and no profit-sharing. It is the right answer for a 5–15 person company offering its first retirement benefit; it is the wrong answer for the owner-employee who wants to defer $23,500+ themselves.
Student loan matching as a benefit
Effective for plan years beginning after December 31, 2023, employers may treat qualified student loan payments as if they were elective deferrals for purposes of the employer match. An employee paying down a federal student loan can have those payments matched into their 401(k) — even if the employee is not contributing to the plan themselves.
This is a real recruiting tool for businesses hiring younger professionals — accountants, lawyers, engineers, healthcare workers — who are often choosing between paying student loans and saving for retirement. The implementation work is real (you need to verify loan payments, typically via employee self-certification, and the matching contributions flow through normal plan mechanics), but the benefit reads well in an offer letter.
Expanded small-employer plan startup credits
SECURE 2.0 dramatically expanded the existing small-employer pension plan startup credit (IRC §45E). For employers with 50 or fewer employees, the credit now covers 100% of qualified startup costs (up from 50%) for three years, capped at $5,000 per year — meaning a small business can offset up to $15,000 of plan setup and administration costs.
There is also a new credit under IRC §45T for employer contributions to non-highly-compensated employees, worth up to $1,000 per employee, phased out over five years. The IRS Form 8881 is used to claim the credit.
For a 10-person business setting up its first 401(k), these credits genuinely change the math. The plan effectively pays for itself for the first three years. Talk to a fractional CFO before you sign with a 401(k) provider — the cheapest provider is rarely the right one once you factor credit eligibility, plan documents, and the auto-enrollment requirements in.
FAQs
Q: Does the auto-enrollment requirement apply to existing 401(k) plans?
No. The mandate applies only to 401(k) and 403(b) plans established after December 29, 2022. Plans that existed before that date are grandfathered and can continue without auto-enrollment, though sponsors can voluntarily adopt it. Mergers and certain plan changes can trigger application of the rule even to grandfathered plans — a plan administrator should review any contemplated restatement carefully.
Q: Is the Roth catch-up rule for ALL employees 50+, or just high earners?
Just high earners. Employees with prior-year FICA wages of $145,000 or less (indexed) can still make their catch-up contributions on a traditional pre-tax basis. The Roth-only requirement kicks in above that wage threshold. The threshold is indexed annually, so verify the 2026 figure with the IRS notice in late 2025 or early 2026.
Q: What happens if I just keep doing things the way I did in 2024?
For an existing plan, much is unchanged. For a new plan, you have a compliance gap. For high-earner catch-ups, you have an operational error that compounds — once 2026 contributions are made pre-tax that should have been Roth, the correction is messy, requiring distribution of the excess, W-2 amendments, and potentially Form 1099-R issues. ERISA corrections under the Voluntary Correction Program are routine but expensive. Fix it before year-end if you find it.
Q: I am a solo S-corp owner with a solo 401(k). Do these rules apply to me?
Most of them, no. Solo 401(k) plans (covering only the owner and spouse) are exempt from auto-enrollment and most ERISA requirements. The age 60–63 catch-up does apply to solo 401(k)s. The Roth catch-up rule applies if you have FICA wages above the threshold and are making catch-up contributions — your plan documents need to permit Roth deferrals. Many solo 401(k) plan documents from pre-2022 do not, and need to be amended.
Get your 401(k) and SECURE 2.0 compliance straight
If you sponsor a 401(k), you need to know whether your plan documents reflect 2025 and 2026 changes, whether payroll is auto-enrolling correctly, and whether your high earners are caught by the Roth catch-up rule. We work alongside your plan administrator and payroll provider to confirm — and to model the actual tax impact of starter 401(k)s, Roth catch-ups, and SECURE 2.0 credits for the business.
Tell us about your business — we will work out where the SECURE 2.0 rollout is hitting you and what to do about it.