Auto-Enrollment: What Participants Need to Know

Have you heard that automatic enrollment in your employer’s retirement plan will become mandatory in 2025? Feelings of confusion or hesitancy are understandable. We’re here to ensure you know all there is to know about your options and how the auto-enroll process works, so you can rest easy while saving for your retirement.

Key Takeaways:

• SECURE ACT 2.0 requires certain business owners with plans established after December 29th, 2022, to automatically enroll their employees into their retirement plans beginning January 1, 2025.
• If you do not wish to contribute, or wish to contribute a different amount, you may opt out of auto-enrollment and set your own savings strategy.
• If you remain auto-enrolled, your contribution amount will be automatically escalated annually to a maximum set by the plan.
• Though you don’t have to opt in, staying enrolled in your employer’s plan can give you a head start on the road to retirement.

How does the auto-enrollment feature work?

When you become eligible for the plan, your employer must provide you with a Summary Plan Description (SPD). This document will provide you and your beneficiaries with all the information you need regarding the plan including but not limited to:

• Plan type
• Eligibility requirements
• Description of benefits
• Participants rights
• Rules regarding potential termination of plan

Before your employer automatically enrolls you into the company-sponsored retirement plan, they are required to provide a formal Automatic Enrollment notice, describing:

• The process of auto-enrollment,
• The default deferral percentage,
• The percentage of annual escalation,
• The default investment, and
• A participant’s right to opt-out or make changes.

If you choose to stay enrolled in your employer’s plan, your pre-tax contributions will be transferred into your retirement account automatically each payroll period.

Do I have to contribute to my employer’s plan?

The short answer is no. Although your employer will be required to automatically enroll you in their plan, you do not have to continue contributing to the plan. You may decide to opt out of your employer’s company-sponsored retirement plan or stay in the plan and adjust your contribution rate. To make manual changes to your account, visit your ePlan Services participant dashboard.

Why should I remain auto-enrolled in my employer’s plan?

Participating in your employer’s retirement plan may prove beneficial for you in the long run. Contributing now is crucial to maximizing potential gains from compounding interest. Secondly, you could potentially save even more if your employer offers matching contributions. Here are some additional benefits of opting into your employer’s 401(k) retirement plan:

• It provides tax breaks: Contributions to your 401(k) account are taken out of your paycheck before taxes, lowering your total taxable income. These funds are also tax-deferred, meaning you won’t have to pay taxes on them until the time of withdrawal.
• It’s your money: The money you contribute to the plan over the course of time with your employer belongs to you. This means even if you leave your current employer, you have options. If you do contribute to your company’s 401(k) plan, reach out to your plan administrator to find out what your options are if you decide to leave the company. You may be able to roll it over into your new employer’s 401(k) or transfer it into an IRA.
• It’s flexible: As a plan participant, you can adjust your contribution rates based on the maximum contribution limits for your company’s 401(k) plan.

Conclusion:

Being auto-enrolled in your employer’s company-sponsored retirement plan may seem confusing. But consider this an opportunity to invest in your future. Participating in your employer’s retirement plan helps you prepare for the road ahead because the sooner you participate, the more your savings will mature.