June 11, 2025 | 4-5 Minute Read
One of the roadblocks many active-duty miliary families face in saving adequately for retirement is due to frequent moves, the spouse of the active-duty member may not stay at a job long enough to meet the service requirement of the retirement plans for eligibility and/or vesting. As a reminder, vesting refers to the portion of the employer’s contributions in the retirement account that the employee has ownership of.
SECURE 2.0 seeks to alleviate this issue by allowing employers sponsoring a 401(k) or 403(b) plan to allow spouses of active-duty military members to enter the plan within their first two months of employment and to be immediately vested in employer contributions. To incentivize employers to offer this provision, they are offering a tax credit for employers with fewer than 100 employees with up to $500 per military spouse who receives this special eligibility and immediate vesting.
When it Becomes Effective
This provision became effective for tax years starting after December 31, 2023.
How it Works
Here is how employers can accelerate the eligibility and vesting requirements for spouses of active-duty miliary members:
- This is an optional provision and requires a plan amendment.
- Spouses of active-duty miliary members must be able to join the retirement plan within two months of being hired.
- Spouses of active-duty military members become immediately eligible for matching and/or non-elective contributions offered by the plan.
- All employer contributions are immediately fully vested for the spouses of active-duty military members.
Here is how the tax credits work:
- To be eligible for the tax credits, the employer must have had 100 or fewer employees who earned $5,000 or more in the previous tax year.
- The employer receives a base credit of $200 for each military spouse who joins the retirement plan within two months of their hire date, are eligible to receive employer contributions, and are fully vested in those contributions
- The employer can receive up to an additional $300 for employer contributions made to the military spouse.
- These credits can be used for first three years the military spouse participates in the plan.
Other Considerations
Prior to adopting, Plan Sponsors should consider the following administrative requirements to provide a matching contribution on Qualified Student Loan Payments:
- This is an optional plan feature, and the plan must be amended to allow spouses of active-duty military spouses to become immediately eligible and immediate vested. Plans intending to adopt this provision can offer this feature now, but the amendment will need to happen by the end of the remedial amendment period (the end of 2026 for non-governmental plans and 2029 for governmental plans).
- The additional administrative burden that offering a offering separate eligibility requirements and vesting schedule should be considered and the plan sponsor should ensure that they have their processes in place and documented.
- Participants will need to receive communications of these added provisions, through the distribution of the Summary of Material Modifications and Summary Plan Description. Your document provider can supply these documents for distribution.
Benefits² Administrators clients: If you have questions about offering immediate eligibility and vesting to the spouses of active-duty military members and/or the associated tax credits, we encourage you to reach out to your dedicated Retirement Analyst. They can help you with the plan amendment process, discuss administrative procedures, and help you stay compliant.
For non-clients or plan advisors seeking guidance: Feel free to contact Leslie Wood (lwood@benefits2llc.com) for additional information and support. Leslie can provide an overview of the SECURE 2.0 tax credits for providing immediate eligibility and vesting for active-duty military spouses, if a plan document needs amended for this provision, or additional strategies for increased retirement savings and employer tax credits.
Benefits² Administrators would like to thank our armed-forces and their families for their service in providing us a free country.
JP Perryman, QKA
Jeremiah “JP” Perryman, QKA is the Compliance and Operations Manager at Benefits² Administrators. He has more than 15 years of experience working with qualified retirement plans.