The proposed regulations provide guidance to plan administrators for properly implementing this requirement and are proposed to apply to plan years that begin more than 6 months after the date that final regulations are issued. Effective for plan years beginning after 12/31/24, new 401 (k) and 403 (b) plans must meet the requirements for an eligible automatic contribution arrangement (eaca), including auto enrollment. On january 10, 2025, the treasury department and the irs issued proposed regulations addressing one of secure 2.0’s signature requirements
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That all newly established 401 (k) plans and 403 (b) plans with cash or deferred arrangements include automatic enrollment features.
Because many employees either don’t save for retirement or don’t save enough for retirement, congress included a provision in the secure 2.0 act of 2022 (secure 2.0) requiring new or recently established retirement plans to contain an automatic enrollment feature.
New 401 (k) and 403 (b) plans established after december 29, 2022, must automatically enroll eligible employees at a contribution rate of at least 3% of their pay This rate will increase annually by 1% until reaching a minimum of 10%, unless employees opt out. Research has consistently demonstrated that automatic plan enrollment can result in increased plan participation Consequently, the automatic enrollment requirements are intended to provide for the retirement plan coverage of a greater number of employees.
Starting in 2025, most new 401 (k) and 403 (b) plans will be required to automatically enroll eligible employees, a change brought by the secure 2.0 act passed by congress in 2022.
