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Do New-Plan Auto-Enrollment Rules Apply to Existing Employees?
Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.
Q: We are a fairly new private tax-exempt organization that created a 403(b) plan after SECURE 2.0 was enacted. However, we don’t satisfy any of the exceptions to the new automatic enrollment rules; we’re not a church or government, we’ve been around slightly longer than three years, and we have more than 10 employees. Thus, we realize that we need to follow the new auto-enrollment rules in 2025. Would those rules apply only to new hires, or to existing employees as well?
Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:
A: First, you are correct. If your plan does not meet any of the exemption criteria, you will need to follow the new auto-enrollment rules. There has been some confusion regarding whether these rules apply to existing employees, and on January 10, 2025, the IRS released a notice of proposed rulemaking on auto-enrollment requirements under SECURE 2.0 that provided clarification. Under the proposed rule, existing employees would not be required to be automatically enrolled in your plan IF they have already made a deferral election or an affirmative election to opt out of the plan. For existing employees who have NOT made such elections, automatic enrollment would be required. Note that this guidance is proposed and not yet final, so it is possible that this answer may change in the future. The comment period for this proposed rule ends on March 17, 2025, after which we expect the IRS will issue its final rule.
NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.
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