SECURE 2.0 requires newly-established 401(k) and 403(b) plans to automatically enroll eligible employees beginning with the 2025 plan year. Unless an employee opts out, a plan is required to automatically enroll an employee at an initial contribution rate of at least 3% of their pay and automatically increase that contribution rate by 1% each year until it reaches at least 10% of an employee’s pay. 

This requirement generally applies to 401(k) and 403(b) plans established after Dec. 29, 2022, when SECURE 2.0 became law, with exceptions for new and small businesses, church plans, and governmental plans.

However, the AICPA is requesting that the IRS and Treasury make the following changes:

• Investment requirements for trustee directed plans - issue final regulations clarifying that the investment requirements “are not applicable to plans that do not adopt participant direction of investment…,” reads the letter.  “Trustee-directed plans are invested with all assets managed as a pool with no self-directed option, such that the concept of a default investment, or a [qualified default investment alternative] QDIA, does not exist for these types of plans.”
• Determining employee count for small businesses - issue final regulations stating that only employees of the plan sponsor are included in the count for purposes of determining status as a small business. “A small business, for this purpose, is any employer that has 10 or fewer employees,” reads the letter. “Plans sponsored by these employers will not be subject to automatic enrollment requirements until the date that is one year after the close of the first taxable year for which the employer normally employed more than 10 employees.”
• Definition of predecessor employer - issue final regulations that define predecessor employer, since SECURE 2.0 “provides an exception to the automatic enrollment requirements for plans sponsored by an employer (and any predecessor employ) that has been in existence for less than 3 years,” said the letter.

Related: New SECURE 2.0 auto-enrollment and 401(k) catch-up provisions: IRS issues guidelines

“The purpose for our letter is to provide input to Treasury and the IRS in order to further clarify the rules and provide recommendations to help with the implementation of the auto-enrollment provision of the law,” said Kristin Esposito, AICPA Director, Tax Policy & Advocacy.