The Auto Features are Coming

Beginning January 1, 2025, most employers with 401(k) and 403(b) plans established on or after December 29, 2022, must include an eligible automatic contribution arrangement (EACA) feature.* A plan is considered established when it initially adopts an elective deferrals plan provision, even if the effective date is after December 29, 2022, and must comply with all the new auto-enrollment requirements below:

• Offer an EACA that allows permissible withdrawals

• Begin with an auto-enrollment rate between 3-10% and increase by 1% each plan year until reaching at least 10%, but not more than 15% (10% for non-safe harbor plans until the 2025 plan year)

• Direct a participant’s contributions into a qualified default investment alternative (QDIA) that protects the principal if they don’t make investment elections

• Participants can choose to defer more or less than the auto-enrollment rate—or elect not to defer at all

*Exceptions apply. If you have any of the following, you are excluded from adding the SECURE 2.0 auto-enrollment features:

• A small business with 10 or fewer employees

• A business that has existed fewer than 3 years

• A church or governmental plan

If you have your business in a state that has an auto-IRA program, depending on the mandate, it can be a great time to get a 401K plan in place so you can design a plan that works best for you and your employees.