Secure 2.0 Compliance Starts with Payroll - Here’s Why That Matters

Sep 16

Breaking down how SECURE 2.0 turns payroll systems into the frontline of retirement compliance.

When most people think about the SECURE 2.0 Act, they immediately think of retirement plans. And they’re right - this is retirement legislation. But if you stop there, you’ll miss one of the most important truths behind the law:

Secure 2.0 is as much about payroll as it is about retirement.

From new automatic enrollment requirements and Roth employer contributions to catch-up changes and student loan matches, Secure 2.0 places more responsibility on your payroll system than ever before. These aren’t theoretical rules, these are compliance mandates that live and breathe in your payroll engine every pay period.

The good news? With the right payroll foundation, you can turn these requirements into opportunities to streamline operations, reduce risk, and support employees more effectively. Let’s break it all down.

Why Payroll Is Now Front and Center in Retirement Plan Compliance

Many of Secure 2.0’s provisions depend on real-time payroll data and automation. That means things like hire dates, eligibility rules, hours worked, wages earned, and participant ages all need to be tracked and acted upon. If that sounds technical, that’s because it is. But it’s also manageable if your payroll system is prepared.

Let’s take a closer look at the key Secure 2.0 provisions that intersect directly with payroll.

1. Automatic Enrollment & Escalation

Effective Date: January 1, 2025 (for plans established after 12/29/2022)
Citation: Section 101, SECURE 2.0

New 401(k) and 403(b) plans must now automatically enroll eligible employees at a default rate of at least 3% but not more than 10%, increasing by 1% each year until reaching at least 10% but not more than 15%. Certain new and small business, church and governmental plans may be exempt.

What Payroll Needs to Handle:

Apply default deferral rates based on plan rules

Track hire dates and eligibility windows

Handle opt-outs and custom elections

Manage automatic escalation by year

Note:

If you use a 360° payroll-to-recordkeeper integration, much of the enrollment logic (like default deferral application and escalation tracking) is driven by the recordkeeper. However, eligibility and hire data still originates in payroll and must be accurately configured to ensure compliance.

2. Roth Employer Contributions (Optional)

Effective Date: Available now
Citation: Section 604, SECURE 2.0

Employers may now allow employees to elect Roth treatment for matching contributions. These must be 100% vested immediately and taxed at the time of contribution.

What Payroll Needs to Handle if your Plan allows this:

Record participant Roth elections for employer contributions

Apply appropriate tax treatment during payroll processing

3. Catch-Up Contributions Must Be Roth for High Earners

Effective Date: 2026
Citation: Section 603, SECURE 2.0

Participants aged 50+ earning more than $145,000 (indexed) in the previous year must make catch-up contributions as Roth (after-tax). If your Plan has no Roth provisions, high earners will no longer be able to make catch-up contributions.

What Payroll Needs to Handle:

Monitor compensation from the prior year

Switch catch-up contributions to Roth if above threshold

Flag employees who are near the threshold

Keep communication clear for affected participants

4. Increased Catch-Up Limits for Ages 60–63

Effective Date: 2025
Citation: Section 109, SECURE 2.0

Participants aged 60 to 63 (by the end of the calendar year they are making the catch-up contributions for) can contribute the greater of $10,000 or 150% of the standard catch-up limit. If your Plan has no Roth provisions, high earners cannot take advantage of the enhanced catch-up limit.

What Payroll Needs to Handle:

Identify employees in the 60–63 age window

Adjust annual contribution limits accordingly

Coordinate with recordkeeper to apply enhanced caps

The same rules apply to high earners for the enhanced catch-up – it must be made as Roth

5. Long-Term, Part-Time Employee Eligibility

Effective Date: 2025
Citation: Section 125, SECURE 2.0

Employees who work 500+ hours per year for two consecutive years must be allowed to participate in the 401(k) plan - even if they are classified as part-time. Employer contributions are not required for LTPT employees, unless the plan elects to cover them.

What Payroll Needs to Handle:

Track hours accurately across plan years
Flag part-time employees who become eligible
Coordinate plan entry and employer contribution exclusion with TPAs or recordkeepers
Maintain audit-ready hour logs

Note: Hours tracking needed to start in 2023 to meet the 2025 requirement.

6. Student Loan Matching Contributions (Optional)

Effective Date: 2024
Citation: Section 110, SECURE 2.0

Employers can match qualified student loan payments as if they were retirement plan deferrals if a Plan Sponsor elects to include this provision. This is an optional provision meant to help employees pay off debt while still receiving plan contributions.

What Payroll Needs to Handle:

Track student loan repayments verified by the participant

Apply employer match logic outside standard salary deferral flow

Share accurate data with the recordkeeper

Beyond Secure 2.0: State-Mandated Retirement Plans

Employers not offering 401(k)s may be required to provide a state-mandated retirement plan.

As of 2025, more than 18 states (including Illinois, California, Oregon, and New York) have laws requiring private employers to:

Enroll employees into a state-sponsored Roth IRA, or

Offer a qualified employer-sponsored plan

What Payroll Needs to Handle:

Deduct and remit contributions to the state plan

Track and report eligibility and opt-outs

Send wage and employment files to the state system

NOTE: In these states it may make sense to create a 401(k) plan. They can be more cost effective than you think and provide your employees with a more robust benefit than a state-sponsored Roth IRA.

Check this official U.S. map from Georgetown University’s CRI for up-to-date state laws.

Common Compliance Pitfalls Without Payroll Alignment

If your payroll system isn’t built to handle these requirements, you may find yourself leaning on:

Manual Excel tracking of hours and eligibility

Off-platform logic for Roth vs. pre-tax handling

Back-and-forth emails with TPAs and advisors

Late data corrections that complicate audits

These inefficiencies increase risk and reduce the ability to scale your benefits offerings, especially as more employers adopt personalized or flexible retirement solutions.

How Strongpay Helps You Stay Ready

Strongpay was purpose-built to support integrated retirement and payroll workflows, not just for today’s rules, but tomorrows too.

We provide:

Eligibility triggers based on hours, hire dates, or age

Auto-enrollment logic, opt-out tracking, and escalation support – integration helps!

Student loan match integration with retirement plan partners

Roth contribution handling for both deferrals and employer match

Catch-up contribution automation with age and income thresholds

Audit-ready reporting with wage type, comp, and employment status

Census-ready data for year-end and midyear testing

Recordkeeper integrations for deferral sync and error reduction

All of this helps ensure that your plan sponsor, advisor, and TPA partners are working from the same clean data set without rework.

A Friendly Word of Advice: Plan Now, Not Later

The intent of Secure 2.0 isn’t to make retirement harder - it’s to help more employees access and benefit from retirement plans.

But the operational lift can be real, especially for businesses trying to manage new mandates, multistate expansion, and evolving benefit strategies.

The earlier your payroll system is aligned with Secure 2.0 requirements, the more flexibility and peace of mind you’ll have, both for compliance and for participant experience.