Secure Act 2.0 and how it may benefit women

From part-time workers to military spouses, Secure Act 2.0 provisions may help women

By Carla Urbaszewski

You might have heard about Secure Act 2.0, but what does it mean? Secure Act 2.0 was passed to give Americans more opportunities to strengthen their overall financial security and protect their retirement savings and income in ways that can sustain them throughout their golden years.

Secure Act 2.0 includes provisions meant to help part-time workers and military spouses save more for retirement, as well as a requirement allowing domestic abuse victims to tap into retirement funds for help in order to meet basic needs.^[1] These reforms are significant to the general population, and specifically women as they represent the majority of each of these targeted groups.

Benefits for part-time workers: 59% are women

Most women working part-time are doing so because caregiving and other family responsibilities are preventing them from seeking full-time work, and women are about 1.6 times more likely to work part time than men. In fact, 27.9% of all employed women work part time, compared to 17.2% of all employed men.

Prior to the original Secure Act’s passing in 2019, most retirement plans did not allow part-time workers to contribute. For years, countless people, particularly women, were prevented from participating in their company’s retirement plans.

The Secure Act requires employer-sponsored plans to allow long-term, part-time workers to participate. Secure Act 2.0 takes it a step further — beginning in 2025, part-time employees will be eligible to participate after working two consecutive years and completing at least 500 hours of service each year (a change from the original Secure Act’s three-years-of-service rule). 

Benefits for military spouses: 92% are women

Spouses of active-duty service members often encounter obstacles when saving for retirement. According to the Department of Defense, about 30% of military service members experience a change of station move every year. When they move, their spouses usually relocate with them. The result is that spouses do not remain employed long enough to become eligible for a company’s retirement plan or to vest in employer contributions. 

Secure Act 2.0 encourages businesses to make it easier for military spouses to participate in retirement plans and ease some of the burdens of frequent moves. The new provision provides small employers – with 100 employees or fewer – a tax credit of up to $500 per year per military spouse. The credit is available for three years per military spouse. 

To receive the credit, small employers must make a military spouse:

• eligible for retirement plan participation within two months of hire
• be eligible for any matching or non-elective contribution available to a similarly situated employee with at least two years of service, and

• must be 100 percent immediately vested in all employer contributions

Benefits for domestic abuse survivors

Secure Act 2.0 recognizes that survivors of domestic abuse, 85% of whom are women, may need to access money in their retirement accounts for various reasons, such as escaping an unsafe situation, securing safe housing, and meeting basic needs.

For these survivors, it waives the 10% IRS penalty tax on the lesser of $10,000 or 50% of the vested value in the account.

Benefits for student loan borrowers: 58% of all student loan debt belongs to women

Many Americans are overwhelmed with student loan debt and often feel they must choose between paying off this debt or saving for retirement. Those who are unable to contribute to their company retirement plans are also missing the opportunity to take advantage of any available matching contributions.

Female borrowers hold more than $900 billion in student loan debt, and their average debt is 9.6% higher than their male peers one year after graduation. In addition, it takes women an average of two years longer to pay off their student loans despite making higher payments.

To allow employees to both pay off student loan debt and save for retirement, Secure Act 2.0 allows employers to make matching contributions under a 401(k) plan for payments employees make on their student loans — this applies to all qualified student loans, not just subsidized loans. Now, employees can pay off their loans and at the same time, save for retirement through matching contributions. This becomes effective 2024.

Benefits for living longer: women outlive men by 8 years

Secure Act 2.0 even addresses the longevity risk women face by outliving men by an average of eight years, allowing for increased maximum contribution limits on Qualifying Longevity Annuity Contracts (QLACs). Distributions from a QLAC can be deferred until age 85 and assets in a QLAC are not included in the calculation of required minimum distributions (RMDs), giving women and all retirees the opportunity to hedge the opportunity of outliving their savings in IRAs and other defined contribution plans. The new provision allows contract owners to contribute up to a $200,000 (indexed) lifetime maximum to a QLAC. This is an increase from the greater of $145,000 or 25% of qualified/IRA balances.

Overall, the Act contains nearly 100 new provisions designed to promote savings and offer more flexibility to those saving for retirement. To fully understand its benefits, be sure to ask your financial professional about Secure Act 2.0.

^[1] It's important to note that many of the provisions included in the Act need further clarification by the Treasury Department and the Internal Revenue Service. Our team will continue to analyze these changes and update you as the law is interpreted and implemented.