Plan Sponsors Warm Up to Super Catch-Up

Plan sponsors are adopting the optional provisions of the SECURE 2.0 Act of 2022 that support long-term retirement savings and deprioritizing those that focus on short-term liquidity, according to new research from Vanguard.

Catch-Up Provisions

Among the approximately 1,300 defined contribution plans Vanguard administers, 91% opted to raise the 401(k) catch-up limit for participants ages 60 through 63 by the end of 2025. Last year was the first opportunity for plan sponsors to use the tool to support late-career savers. Instead of contributing the standard catch-up of up to $7,500 allowed for participants age 50 and older, SECURE 2.0 allows the age 60-to-63 cohort to contribute a maximum of $11,250.

Among participants ages 60 through 63 in plans that offered super catch-ups, 21% reached the 402(g) elective deferral maximum of $24,500, and more than 90% of the maximizers also made catch-up contributions of some kind. Two-thirds of catch-up contributors exceeded the standard $7,500 limit, and 9% reached the $11,250 maximum—bringing their total annual contributions to $35,750.

About one-quarter of catch-up savers directed some portion of their contributions to Roth accounts in 2025. As of year-end 2024, the plan year for which the most recent data is available, 86% of Vanguard-administered plans offered Roth contributions. On January 1, a SECURE 2.0 provision requiring higher-earning participants to make age-based catch-up contributions on a Roth basis took effect.

Automatic Portability

SECURE 2.0 also expanded the ease of workers retaining their retirement account savings when they change jobs, such as through automatic portability provisions, facilitating the transfer of the savings into an individual retirement account, for accounts with balances less than $7,000. The legislation raised the minimum balance threshold from its previous amount of $5,000.

By year-end 2025, 7% of plans had adopted auto-portability, Vanguard’s data showed.

“It’s a modest step with significant long-term potential,” the report stated.

Qualified Disaster Recovery Distributions

Through SECURE 2.0, plan sponsors can provide distribution and loan relief in response to a qualified disaster declared by the Federal Emergency Management Agency. Participants affected by a federally declared disaster can now withdraw up to $22,000 without having to pay the 10% penalty normally incurred for an early withdrawal. Previously, participants would only take a hardship withdrawal if Congress enacted a special law for the specific disaster.

By December 31, 2025, 16% of plans had implemented the provision and 0.2% of participants had used it. Vanguard described the adoption of QDRDs as “still emerging.”

Emergency Expense Withdrawals

Under SECURE 2.0, employers may allow participants to access up to $1,000 per year, penalty-free, for unexpected financial needs. As with the domestic abuse provision, repayments must be made within three years after the distribution is initiated.

“Despite the potential benefits, adoption remains modest,” Vanguard reported. In 2025, 4% of plans offered emergency expense withdrawals, and 0.4% of participants initiated one. Meanwhile, 12% of employers that responded to Alight’s “2025 Hot Topics in Retirement and Financial Wellbeing,” based on data from a survey conducted among 122 employers in September 2024, said they would add the feature at some point in the future.

Emergency Savings Sidecar Accounts

Vanguard does not currently offer in-plan $2,500 emergency savings accounts “due to limited interest,” according to a spokesperson from the firm. Additionally, no employers reported to Alight in 2024 that they were committed to adding it, and 33% said they were definitely not adding it.

PLANSPONSOR previously reported that some employers have expressed concern about connecting an emergency savings account to the retirement plan, fearing that employees will treat their 401(k) accounts as sources for short-term liquidity needs, rather than as long-term savings vehicles.

Domestic Abuse Withdrawal

Another provision in the early stages of adoption is a withdrawal option for participants experiencing domestic abuse. Participants may withdraw the lesser of $10,000 (indexed) or 50% of their vested balance without incurring the 10% early withdrawal penalty. Repayment must be made within three years of the distribution.

Last year, 6% of Vanguard plans offered the provision, and 0.1% of participants used it. According to Alight’s 2024 survey, 15% of sponsors said they would add the provision, and 19% said they were likely to add it.

Self-Certification for Hardship Withdrawals

Hardship self-certification, including for domestic abuse-related withdrawals, allows plan sponsors to rely on employees’ written self-certification that their hardship withdrawals fulfill one of the IRS’ approved safe harbor hardship reasons and that the distribution does not exceed the amount required to satisfy the financial need.

About 30% of employers who responded to Alight’s survey in 2024 had incorporated hardship self-certification, and 15% said they had definite plans to add the feature. More than half of those who said they would definitely or likely add it said they planned to do so in 2025. However, adoption of self-certification among plans Vanguard administers remains low: Only 3% of plans offered the provision as of year-end 2025.

As a caveat, Vanguard reported that most plans (87%) use the firm’s summary offer approach to hardship withdrawals, which includes self-certification for hardship withdrawals but removes the need to submit supporting documentation up front. The firm stated in its report that employers may prefer the summary offer approach to administer withdrawals.