§414A Requirements related to automatic enrollment

Summary

401(k) plans and 403(b) salary-reduction annuities must use automatic enrollment that meets specific rules. The plan must be an "eligible automatic contribution arrangement" that lets workers take allowed withdrawals, uses a default investment that follows federal rules, and sets a default contribution rate that starts between 3% and 10% of pay (unless the worker opts out or picks a different rate). Each year after a worker’s first year, the plan must raise that default by 1 percentage point until it reaches at least 10% but no more than 15%. For plan years ending before January 1, 2025, the top limit is 10% instead of 15%. Automatic enrollment rules do not apply to SIMPLE plans, plans or annuities set up before this law took effect (with special rules for multi-employer plans adopted after that date), government and church plans, or plans of employers in business less than 3 years or before one year after the first year the employer normally had more than 10 employees. For multi-employer plans, the employer rules are applied separately.