Starting in 2025, most new 401(k) plans will have a built-in feature: auto-enrollment. Thanks to the SECURE 2.0 Act, if you’re launching a retirement plan for your business, you’ll likely need to automatically enroll eligible employees, whether they ask for it or not.
The goal is simple: help more people save for retirement. However, this isn’t just a compliance box for business owners to check. It’s a strategic opportunity. New plans must start employees at a contribution rate of at least 3% of their pay, increasing 1% annually until it hits 10% unless the employee opts out or sets a different rate. This can improve participation, reduce administrative headaches, and enhance your company’s benefits offering.
Before you start worrying about more government red tape, there’s good news. Not all businesses are affected.
You’re off the hook if you have 10 or fewer employees or your company is under three years old. Existing 401(k) plans set up before SECURE 2.0 passed are also grandfathered in.
If you plan to start a new plan in 2025 or beyond, it’s smart to get ahead of the game. Plus, there are real perks. Small businesses may qualify for tax credits of up to $500 per year for adding auto-enrollment. This will also result in higher participation, making it easier to pass nondiscrimination testing, helping avoid costly plan corrections down the line, and allowing higher contributions from owners.
Auto-enrollment might sound like a hassle, but it can make your life easier and your business stronger. Higher employee engagement, better retention, and fewer compliance issues are all on the table.
The key is planning ahead:
- Review your payroll system to ensure it can support automatic deductions and escalation.
- Start planning how you’ll communicate these changes to your team.
If you need help navigating the setup or making sense of the new rules, we’re here to help turn regulation into opportunity.