Are Your Clients Aware of the Upcoming Automatic Enrollment Mandate? 

In 2025, auto-enrollment, a feature (where employees are automatically enrolled in their organization’s retirement plan) will become law. Don’t let your clients face possible consequences by not complying. Now is the time to act in your clients’ best interests and inform them of the new mandate and the details that come along with it. We’ll ensure that you’re equipped with the facts you need to prepare your clients for 2025. 

Key Takeaways:  

• The SECURE Act 2.0 now requires certain businesses with plans established after December 29th, 2022, to auto-enroll their employees in their retirement plans.  
• Failing to comply with this mandate can jeopardize your plan.  
• Before an employer can auto-enroll their employees, they must provide their employees with certain required plan documents.  

Why is auto-enrollment being mandated? 

According to the U.S. government, half of households aged 55 and older do not have a retirement savings plan. Therefore, SECURE Act 2.0 requires businesses with plans established after December 29^th, 2022, who employ more than ten people and have existed for more than three years, to automatically enroll their employees in their plans.  

SECURE Act 2.0 further incentivizes business owners to add auto-enrollment by offering valuable tax credits for doing so. Employers who add this feature may be eligible for a tax credit of $500 per year for three years.  

What are the consequences of not adding an auto-enrollment feature? 

Adding an auto-enrollment feature is becoming law unless the employer’s plan is exempt. Their plan may be exempt if:  

• It was established prior to December 29th, 2022.  
• Their business does not typically employ more than ten employees.  
• Their business has existed for less than three years.  

If your clients’ plans are not exempt from automatic enrollment, then failure to comply with this law can result in costly fixes. For more information about automatic enrollment, visit our ePlan Services help center today. 

How do employers prepare participants for auto-enrollment? 

Before your clients enroll their eligible employees in their company-sponsored retirement plans, they must first ensure their employees, (future participants), are properly prepared. This is done with a Summary Plan Description, (SPD). An SPD is paramount for informing participants and beneficiaries about the plan details and benefits. A few of the details included in the SPD are as follows:  

• Name and plan type  
• Plan eligibility requirements  
• A participant’s benefits and their rights to those benefits  
• Rules regarding the potential termination of the plan  
• Statement of ERISA rights made available to plan participants  

Eligible employees also need to be formally informed through a required Automatic Enrollment notice at least 30 days prior to the enrollment.  The notice should include:  

• Their deferral percentage 
• The employee’s right to discontinue contributions or to change contribution rate 
• Their default investment 

Are your clients not sure that this will be enough to help their employees understand what this mandate is and why it’s taking place? Employers can go the extra mile to inform their employees about the upcoming auto-enrollment mandate by providing them with additional information via emails, flyers, or mailings that explain the benefits of contributing to their company-sponsored retirement plans. These benefits could include:  

• Tax advantages: 401(k) contributions are made on a pre-tax basis, so participants won’t have to pay taxes on those funds until the time of withdrawal.  
• More retirement savings: The sooner participants start contributing to their plans, the more time their funds will have to mature.  
• It’s easy: Since participants will be automatically enrolled in the plan, all they need to do is monitor their contributions and retirement outlook in their ePlan Services dashboard.  

Conclusion:  

Your clients need to be informed of their responsibilities and guided through how to properly prepare their future 401(k) retirement plan participants. Now is your chance to position yourself as a financial advisor with credibility. Don’t miss out on an opportunity to provide your clients with necessary information that can also potentially boost your reputation of excellence. Your clients who are not currently in compliance might appreciate an early head’s up that saves them from future issues. Review your book of business and contact those who will not be exempt!