How SECURE Act 2.0 affects your church retirement plans

You may have heard about SECURE (Setting Every Community Up for Retirement Enhancement) Act 2.0 legislation and the opportunities it could bring to employers with retirement plans. This new law will impact church plans differently from other employer plans. To help you navigate these differences, we’ve highlighted some of the main requirements and opportunities from SECURE 2.0 below. 

What new requirements from the law do I need to know about?

There is one significant rule change that church plan employers need to be aware of: Roth catch-up contributions for highly compensated employees.

• What’s changing? If wages for an employee were over $145,000 (adjusted annually for cost of living), catch-up contributions must be made on a Roth basis. If Roth contributions are needed for highly compensated employees' catch-up contributions, other participants must be allowed to make Roth contributions as well. This will be effective in January 2026.
  
  Currently, clergy do not seem to be subject to this rule, but that may change depending on future technical corrections by the IRS.
• What do you need to do? If your plan has highly compensated employees, you need to make sure your plan allows for Roth contributions. If the participant is making catch-up contributions, such contributions will need to be coded correctly.

What new requirements from the law will not affect church retirement plans?

• Auto-enrollment requirement: This rule won’t affect church plan employers. Auto-enrollment will still be available as an election for church plans, not a requirement.
• Long-term part-time employee eligibility: Rule changes around eligibility for long-term part-time employees in 403(b) plans won’t be applicable to church plan employers.

What opportunities does the law present to church plans?

• Many of the new features available through SECURE 2.0 need to be added to plan documents prior to being implemented. New features have created implementation challenges for recordkeepers and administrators as well. Because of these two issues, you may not have access to all of the new features right away until IRS and legislative guidance is given on how these can be implemented, the documents for your plan are updated, and recordkeeping systems are ready to handle the changes.
• Here’s a highlight list of optional features that could be implemented in church plans in the future:
  • Student loan deferrals treated as elective deferrals for employer match.
  • Emergency distribution not subject to penalty tax.
  • Employer contributions to 403(b) treated as Roth contributions.
  • Increased catch-up contribution limit.

• This cannot be implemented in a church plan:
  • Emergency Savings Account sidecar: This feature is specifically available for ERISA plans, so church plans will not be able to utilize them.