Must a New 403(b) Plan Have Automatic Enrollment?

Q: We are a private, tax-exempt organization which, for many years, has maintained a 401(k) plan but are considering establishing a new 403(b) plan after learning about the design advantages for nonprofits. Would the new 403(b) plan be subject to the new automatic enrollment requirements of SECURE 2.0?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: It is possible that your 403(b) would be required to have an automatic enrollment arrangement. In general, a pre-existing 401(k) or 403(b) plan is not subject to these new automatic enrollment requirements. However, assuming you will terminate your 401(k) plan to establish the new 403(b) plan, this exemption would likely not extend to the new plan, as existing exemptions do not include previously maintaining a retirement plan. See 2025-00501 of the Federal Register.

Exemptions to the automatic enrollment provisions include plans such as governmental plans, church plans, plans of small employers with 10 or fewer employees, SIMPLE plans and plans of new employers that have been in existence for less than three years. If you satisfy one of these exemptions, automatic enrollment would not be required for your new 403(b) plan. As always, the Experts advise seeking experienced ERISA counsel when establishing a new plan.

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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