The sea ice component of the Community Earth System Model version 2 (CESM2) contains new “mushy‐layer” physics that simulates prognostic salinity in the sea ice, with consequent modifications to sea ice thermodynamics and the treatment of melt ponds. The changes to the sea ice model and their influence on coupled model simulations are described here. Two simulations were performed to assess the changes in the vertical thermodynamics formulation with prognostic salinity compared to a constant salinity profile. Inclusion of the mushy layer thermodynamics of Turner et al. (2013, https://doi.org/10.1002/jgrc.20171) in a fully coupled Earth system model produces thicker and more extensive sea ice in the Arctic, with relatively unchanged sea ice in the Antarctic compared to simulations using a constant salinity profile. While this is consistent with the findings of uncoupled ice‐ocean model studies, the role of the frazil and congelation growth is more important in fully coupled simulations. Melt pond drainage is also an important contribution to simulated ice thickness differences as also found in the uncoupled simulations of Turner and Hunke (2015; https://doi.org/10.1002/2014JC010358). However, it is an interaction of the ponds and the snow fraction that impacts the surface albedo and hence the top melt. The changes in the thermodynamics and resulting ice state modify the ice‐ocean‐atmosphere fluxes with impacts on the atmosphere and ocean states, particularly temperature.