Mandatory Automatic Enrollment [4019K) Plans]
EFFECTIVE PLAN YEARS AFTER DECEMBER 31, 2024
One of the main reasons many Americans reach retirement age with little, or no, savings is that too few workers are offered an opportunity to save for retirement through their employers. Even for those employees who are offered a retirement plan at work, many do not participate.
Automatic enrolment in 401(k) plans – providing for people to participate in the plan unless they take the initiative to opt out – significantly increases participation.
Secure Act 2.0, Section 101 requires new 401(k) and 403(b) plans to automatically enroll participants in the respective plans upon becoming eligible (and the employees may opt out of coverage).
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The initial auto enrolment amount is at least 3% but not more than 10%
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Each year thereafter that amount is increased by one percentage point until it reaches at least 10%, but not more than 15%.
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All 401(k) and 403(b) plans in existence before the date of enactment of this Act are grandfathered (i.e., not required to have automatic enrolment).
The following employers are exempt from the mandatory enrolment, including:
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Small businesses with 10 or fewer employees.
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SIMPLE Plans (within the meaning of section 401(k)(11)).
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Employers that have been in business for less than three years.
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Church Plans.
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Government Plans.
Effective Date: Plan years beginning after December 31, 2024