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Mandatory Automatic Enrollment—Is My Plan Grandfathered?

“My client established a new 401(k) plan effective 1/1/2023. The plan does not have an automatic enrollment feature. Would my client’s plan be considered ‘grandfathered’ under SECURE Act 2.0 and, therefore, exempt from the mandatory automatic enrollment requirement that takes effect in 2025?”

Highlights of Discussion

Even though your client established a plan before the date by which most new plans must include an automatic enrollment and escalation feature (i.e., by the 2025 plan year), the plan does not meet the definition of grandfathered for purposes of being exempt from the automatic enrollment requirement.

Section 101 of SECURE Act 2.0 of 2022 requires 401(k) and 403(b) plans to automatically enroll participants in the following eligible automatic contribution arrangement (EACA) upon becoming eligible. The Year 1 enrollment amount must be least 3% and may go up to 10%. For subsequent years, the deferral amount is increased by one percentage point until it reaches at least 10%, but not more than 15%.[1] Participants may opt out or elect another percentage. The following plans are exempt:

  • Grandfathered plans (i.e., all current 401(k) and 403(b) plans established as of 12/29/2022—the date of SECURE 2.0’s enactment)
  • Businesses with 10 or fewer employees
  • Businesses in existence for less than 3 years
  • Church plans
  • Governmental plans


Because your client did not establish the company’s  401(k) plan on or before 12/29/2022, it does not qualify for the grandfathered exemption. Therefore, your client will have to incorporate the EACA described above by the 2025 plan year unless, of course, one of the other exemptions applies.


[1] Nonsafe-harbor plans are capped at 10% until the 2025 plan year

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