Secure 2.0 is forcing companies to add Roth 401ks in order to have catch-up savings because they will be required to go into Roth 401ks. That was delayed a year or so in order to let the companies make the change since it is very complex legally and paperwork-wise. Once the Roth 401ks are in place across all 401ks, then it would be very easy to eliminate the tax deductible part. for individual contributions. I recommended to all my kids when they started working to put their savings into Roth IRAs, 401ks, or 403bs to the extent practicable.
Corporate matches will likely still need to have the option of being tax deductible because otherwise people will be paying taxes on income they can't access to pay those taxes, unless it is structured for the companies to pay that tax.
I think the big change that is needed for 401ks is to limit the total amount that can be contributed into these accounts in a year. The current value is so big that very few people can get there, both on an individual basis and including the corporate contribution - I am in the top 10% and my individual and corporate contributions do not hit the combined allowable maximum. Something like an individual contribution limit equal to 20% of median household income with a similar limit on corporate contribution would be rational. That would halve the total maximum contribution levels with much of it exposed to immediate income taxes. The catchup provision is good because it is not particularly big, will need to go into Roth, and will give people the chance to do savings in their peak earning years, including after putting kids through college etc..
Regarding basic education like "you have to pick funds too" - I have been helping my family with personal finance for years. There is zero usable personal finance taught in schools and the US has a very complex system, largely structured by the corporations and accidental savings structures like the 401k. The concept that 401ks are under ERISA and have fiduciary protections while 403bs are only lightly regulated without fiduciary protections is not understood at all and is mind-blowing that the difference is allowed to exist.
People have no idea how to do the most basic functions in this complex system and are quickly overwhelmed by the paradox of choice which is why the automatic enrollments have been so successful. The system is deliberately set up to be as complex as possible so that people can be "guided" through it to corporate advantage. My basic instructions are very simple and fly in the face of all of the financial advertising which in turn is contrary to the academic recommendations that closely track with my recommendations. So simply save an emergency fund, 15% in a Roth 401k or IRA in a low-cost target date fund, avoid most debt, don't rush to buy a house (certainly don't buy more than you can comfortably afford), don't watch financial TV, and don't compare yourself to other people. Most people can end up with over $100k net worth by their mid-30s doing this. Compounding will mushroom this by age 65. People do not understand that their assets will double between age 55 and 65 if positioned and managed properly.
The 401k isn't a very good deal since you're only saving a little up front and potentially paying a lot of taxes when withdrawing. As Mercenary says above, from the government's perspective, the Roth is costing them more in the long run. In fact I've been rolling as much as I can from my 401k to a Roth (when the market is down especially, so I pay less taxes).
Secure 2.0 is forcing companies to add Roth 401ks in order to have catch-up savings because they will be required to go into Roth 401ks. That was delayed a year or so in order to let the companies make the change since it is very complex legally and paperwork-wise. Once the Roth 401ks are in place across all 401ks, then it would be very easy to eliminate the tax deductible part. for individual contributions. I recommended to all my kids when they started working to put their savings into Roth IRAs, 401ks, or 403bs to the extent practicable.
Corporate matches will likely still need to have the option of being tax deductible because otherwise people will be paying taxes on income they can't access to pay those taxes, unless it is structured for the companies to pay that tax.
I think the big change that is needed for 401ks is to limit the total amount that can be contributed into these accounts in a year. The current value is so big that very few people can get there, both on an individual basis and including the corporate contribution - I am in the top 10% and my individual and corporate contributions do not hit the combined allowable maximum. Something like an individual contribution limit equal to 20% of median household income with a similar limit on corporate contribution would be rational. That would halve the total maximum contribution levels with much of it exposed to immediate income taxes. The catchup provision is good because it is not particularly big, will need to go into Roth, and will give people the chance to do savings in their peak earning years, including after putting kids through college etc..
Regarding basic education like "you have to pick funds too" - I have been helping my family with personal finance for years. There is zero usable personal finance taught in schools and the US has a very complex system, largely structured by the corporations and accidental savings structures like the 401k. The concept that 401ks are under ERISA and have fiduciary protections while 403bs are only lightly regulated without fiduciary protections is not understood at all and is mind-blowing that the difference is allowed to exist.
People have no idea how to do the most basic functions in this complex system and are quickly overwhelmed by the paradox of choice which is why the automatic enrollments have been so successful. The system is deliberately set up to be as complex as possible so that people can be "guided" through it to corporate advantage. My basic instructions are very simple and fly in the face of all of the financial advertising which in turn is contrary to the academic recommendations that closely track with my recommendations. So simply save an emergency fund, 15% in a Roth 401k or IRA in a low-cost target date fund, avoid most debt, don't rush to buy a house (certainly don't buy more than you can comfortably afford), don't watch financial TV, and don't compare yourself to other people. Most people can end up with over $100k net worth by their mid-30s doing this. Compounding will mushroom this by age 65. People do not understand that their assets will double between age 55 and 65 if positioned and managed properly.
The 401k isn't a very good deal since you're only saving a little up front and potentially paying a lot of taxes when withdrawing. As Mercenary says above, from the government's perspective, the Roth is costing them more in the long run. In fact I've been rolling as much as I can from my 401k to a Roth (when the market is down especially, so I pay less taxes).
I buy that the tax structure will change on retirement accounts. I think Roth IRAs will be the first to go, though.