polling places | spring 2023
‘Off’ Putting Tax credits soothe sting of SECURE 2.0’s auto-enroll mandate By Nevin E. Adams, JD
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here are a lot of optional plan design enhancements to be found in the new SECURE 2.0 Act of 2022—but there’s one mandatory feature that could have effects both positive—and negative. In late January we asked NAPA-Net readers to weigh in. Specifically, beginning in 2025, all new 401(k) and 403(b) plans (which is to say all adopted after 12/29/22) except businesses with fewer than 10 employees, new businesses less than 3 years old, and churches and governments, must automatically enroll participants at 3%-10% and increase the rate by 1% per year to at least 10%, but no more than 15%. Of course, employees
would have at least 90 days to opt out and take a distribution of any automatic deferrals. This also applies to adoption of a MEP after the enactment date (based on the employer’s adoption, not the elective date of the MEP). This is arguably a good thing for participants, and is consistent with the growing trend of employers to not only adopt automatic enrollment but also contribution acceleration. But might the requirement to do so (even though it doesn’t have to be implemented until 2025) slow new plan adoption? Or might that (potential) hesitation be overcome by other provisions in SECURE 2.0 (notably the generous tax credits for new plans)?
Well, we asked readers, generally speaking, what impact they thought the new automatic enrollment requirement would have: 33% - I think plans will adopt automatic enrollment before 2025. 23% - It might produce hesitation, but the SECURE 2.0 tax credits will overcome that. 13% - Don’t expect it to have any real impact. 11% - It doesn’t take effect until 2025, so no impact. 11% - Oh, it has already caused a pause. 9% - No earthly idea. And then we asked readers, generally speaking, what they thought of this idea—and feelings were, again, “mixed”: 27% - A great idea, overdue. 22% - Something small plan sponsors probably won’t want to deal with. 19% - A great idea. 15% - A no-brainer alongside the start-up tax credits in SECURE 2.0!
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