Get ready: Automatic enrollment is mandatory in 2025 and now is the time to start preparing for this change!

Under SECURE 2.0, there were numerous changes to retirement planning and one of the biggest changes is that automatic enrollment will be mandatory in 2025. What that means is that most plan sponsors must adopt automatic enrollment provisions for 401(k) and 403(b) plans.

For many employers, there are already provision in place but if your company doesn’t yet have it, it will require a shift in how those types of plans are operated and administered – and planning needs to start now, as 2025 is only a few months away!

Plan sponsors need to have an understanding of the changes and requirements, as it is their responsibility to meet the standards set by SECURE 2.0.

There are a few exceptions to this pending change. For the most part, any 401(k) and 403(b) plans established on or after Dec. 29. 2022 must begin to automatically enroll participants on Dec. 31, 2024.

Plans that were established before Dec. 29, 2022 are grandfathered in – meaning they aren’t required to automatically enroll eligible employees. And there are also a few other exemptions to automatic enrollment, including:

  • Companies with 10 or fewer employees
  • Companies that been in business for less than three years
  • Government and church plans
  • SIMPLE 401(k) plans

There are a few other SECURE 2.0 requirements under this automatic enrollment mandate. For example, 401(k) plans and 403(b) plans must have an automatic enrollment feature that includes automatic escalation provisions, to name one.

Also, companies must send annual notices to eligible employees about auto enrollment and how it works – and it should be sent by Dec. 2, 2024.

There is a silver lining here! Plan sponsors can claim an automatic enrollment tax credit – provided certain provisions are met.

It is no small undertaking to implement auto enrollment. That’s why plan sponsors should be working on it now – as the deadline is coming.

Do you still have questions about retirement planning options?

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