IRS Grandfather Interpretation

Starting with the 2025 tax year, the SECURE Act 2.0 will require employers that establish new 401(k) or 403(b) plans to auto-enroll employees in the savings plans. The minimum auto-enrollment contribution rate will range from 3% to 10%. Each year, the minimum contribution rate will then increase by 1% until the rate reaches 15%. Under the law, plans started prior to December 29, 2022 will be exempt from the auto-enrollment requirement. Late in 2023, the IRS clarified this grandfathering provision in guidance released late in 2023. Pursuant to that guidance, when a single employer plan that is grandfathered later joins a multi-employer plan or pooled employer plan that is not grandfathered, the original single employer plan loses its grandfathered status.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the IRS interpretation of the grandfathering provision for required auto-enrollment in retirement plans.

Below is a summary of the debate that ensued between the two professors.