Mandatory Automatic Enrollment—Is My Plan Grandfathered?

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business.  

A recent call with a financial advisor from Ohio dealt with a question on automatic enrollment. The advisor asked: “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 Years 2-8, 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.

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