Optional SECURE 2.0 Provisions for Manufacturing Plan Sponsors

Ellen Alphonso

The Manufacturing Institute and Deloitte project that there will be 2.1 million unfulfilled jobs in the manufacturing industry by 2030, resulting from a lack of skilled labor (Wellener, P., Reyes, V., Ashton, H. and Moutray, C. (2021, May 4). Creating pathways for tomorrow’s workforce today: Beyond reskilling in manufacturing. Deloitte Insights. Within this report, they cite the challenges of getting entry-level employees in the door. So how do you design a benefits package that simultaneously meets the needs of a workforce with both entry level and highly skilled employees?

SECURE 2.0 introduced over 90 provisions to modernize retirement plans and many of the optional provisions can be utilized to support the unique needs of a manufacturing and distribution workforce. We’ll review a few of these provisions and include considerations for your operating environment.

For your entry level workforce:

Matching contributions for qualified loan repayments: this provision is intended to give some relief to employees who may not save for retirement because of their student loan debt payments (qualified student loan payments or QSLPs).  Under this provision, an employer may make matching contributions based on their employees’ QSLP for the employee, the employee’s spouse or an individual who was the employee’s dependent at the time the loan was made. Student loan repayments that can be treated as QSLPs are generally limited to the salary deferral limit for the year less the participant’s elective deferrals (if any) for the year. In other words, the amount of loan repayments made by an employee count toward the annual limit on elective deferrals. The benefit of this provision to your entry-level workforce is evident and can be a powerful recruiting tool.

If adopted by the Plan, the employer must obtain certification from the employee that the QSLP was made annually and that employees must be given at least 3 months after the close of the plan year to claim the match.  If your employer match contribution is made on a per pay period basis, this most likely would entail an additional QSLP catch up match for employees who take advantage of this provision.

For your experienced workforce:

Distributions for the payment of premiums: if adopted, this provision allows for penalty free distributions of up to $2,500 to be made for the payment of high-quality long-term care insurance. Studies point out that about 70% of Americans over age 65 will require some form of long-term care.  For your workforce who are looking to plan for a comfortable and safe retirement, this provision may be very attractive.

The administrative impact of this provision may be as minor as amending your adoption agreement and providing the elections to your service provider to administer.

SECURE 2.0 drastically rehauled catch up contributions, which will impact your experienced workforce. Starting in 2026, employees who make more than $145,000 must make catch up contributions on a Roth (post-tax) basis. For now, sponsors of 401(k) plans can designate all catch up contributions as pre-tax (a limit of $7,500 for employees 50 and over in 2024).  And in 2025, Plans can update their catch-up contribution rates for employees ages 60 to 63, allowing those employees to increase their catch-up contribution to $10,000 for those 3 years.

Accurate and timely non-discrimination testing, as well as coordination with your payroll provider to update deferral limits for employees will be imperative to keep your plan in compliance.

Partnering with a professional with expertise in Plan operating environments before Plan provisions are adopted can help your company avoid operational errors and costly corrective contributions. If your plan is audit size, connecting with your EBP auditor outside of year end audit requirements can be an excellent way to gather more information for how to remain in compliance with your Plan’s provisions.   No matter the size of plan, Boyum Barenscheer can tailor procedures to ensure ongoing compliance. Contact our manufacturing team for help.


8 Strategies for Boosting Your Manufacturing Production Capacity


Poised for Exit Podcast