• Employers must enroll eligible employees in automatic contribution arrangements for certain retirement plans.

Starting in 2025, the SECURE 2.0 Act mandates automatic enrollment for the following types of retirement plans:

• 401(k) plans: New 401(k) plans established after December 29, 2022, must automatically enroll eligible employees.
• 403(b) plans: Similar to 401(k) plans, new 403(b) plans must also automatically enroll eligible employees

Accounts must be invested by default in a qualified default investment alternative under ERISA Section 404(c)(5).

An employee who is automatically enrolled in a 401(k) or 403(b) plan under the SECURE 2.0 Act mandate has the option to withdraw their earnings-adjusted contributions within 90 days after the first automatic enrollment contribution was withheld.

An automatic contribution arrangement (also known as automatic enrollment or auto enroll) remains an optional feature of:

• 457(b) plans of governmental employers,
• Salary Reduction Simplified Employee Pensions (SARSEPs), and
• Savings Incentive Match Plans for Employees (SIMPLE) individual retirement account (IRA) plans.

Automatic contribution arrangements allow employers to “enroll” eligible employees in the retirement plan automatically unless the employee affirmatively elects not to participate. “Enroll” means that the employer contributes part of the employee’s wages to the retirement plan on the employee’s behalf.

The employer automatically reduces an employee’s wages by a plan-specified default percentage and contributes that amount to the employee’s plan account as an automatic enrollment contribution. The employee may choose to:

• Not contribute to the plan, or
• Contribute a different amount.

Employees are always 100 percent vested (own) in their automatic enrollment contributions.

Generally, most plans deduct automatic enrollment contributions from an employee’s pre-tax wages. This means that the employees don’t pay taxes on the contributions. However, 401(k) and 403(b) plans that accept designated Roth contributions can specify that the automatic enrollment contributions are designated Roth contributions, which means they are deducted from an employee’s after-tax wages. An employer must deposit an employee’s automatic enrollment designated Roth contributions into a designated Roth account.