IRS Issues Proposed Regs on SECURE 2.0 Auto-Enrollment

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 IRS has released proposed regs confirming that there is no delay--meaning that new plans are currently subject to the auto-enrollment rule. The regulations clarify that there is no provision that excludes any class of participant from auto-enrollment, meaning that long-term part-time employees must also be automatically enrolled if they are otherwise eligible and the plan is subject to the rule.  Participants with an affirmative election to opt out of auto-enrollment on file do not have to be automatically enrolled in the plan.  The Preamble to the regulations clarifies that when plans did not automatically enroll participants who were already participating in the plan, yet did not make an affirmative election, they must automatically enroll the participant by the first plan year when final regulations are effective (presumably, 2027).  The participant's default deferral rate must be calculated as though they had been auto-enrolled since 2025.  The regs will be effective six months after the date that final regulations are published.  In the meantime, a reasonable, good faith interpretation of the law is required.  For more information on the auto-enrollment rules, visit Tax Facts Online. Read More: Link to Q3757.1.  Note: Q is updated with a new Q.