Prop. regs. address 401(k), 403(b) automatic enrollment requirement

Treasury and the IRS issued proposed regulations addressing certain SECURE 2.0 Act provisions, including a provision that would require most newly established 401(k) and 403(b) plans to automatically enroll eligible employees beginning with the 2025 plan year.

In general, unless an employee opts out, a plan must automatically enroll the employee at an initial contribution rate of at least 3% of the employee’s pay and automatically increase the initial contribution rate by one percentage point each year until it reaches at least 10% of pay, an IRS news release said. This requirement generally applies to 401(k) and 403(b) plans established after Dec. 29, 2022, the date the SECURE 2.0 Act became law, with exceptions for new and small businesses, church plans, and governmental plans.

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 six months after the date that final regulations are issued. Before the final regulations are applicable, plan administrators must apply a reasonable, good faith interpretation of the statute.

Comments can be submitted through the Federal Register, and a public hearing is scheduled for April 8.

To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.