Starting January 1, 2025, most new 401(k) plans must include automatic enrollment, a feature that enrolls eligible employees into the plan by default unless they actively opt out. This change is part of the SECURE Act 2.0 and is designed to boost participation in workplace retirement plans.

Whether your business must comply depends on your plan’s start date, number of employees, and how long your business has been operating.

Who Must Include Automatic Enrollment?

You must include automatic enrollment in your 401(k) plan if:

  • Your plan was established on or after December 29, 2022,
    AND
  • Your business does not qualify for an exemption (outlined below)

Exemptions from the Automatic Enrollment Mandate

Your business is exempt from the automatic enrollment requirement if any of the following apply:

1. Plan Started Before December 29, 2022

  • Plans adopted before this date are grandfathered in and are not required to add automatic enrollment.
  • You may still choose to add the feature voluntarily.

2. 10 or Fewer Employees

  • If you have 10 or fewer employees as of January 1, 2025, you are temporarily exempt.

3. Business Is Less Than 3 Years Old

  • If your company has been in operation for fewer than three years as of January 1, 2025, you are temporarily exempt.

What Happens if a Plan No Longer Meets an Exemption?

If your plan was initially exempt from the automatic enrollment requirement but later becomes ineligible due to growth or age of business, the mandate applies beginning January 1 of the following year.

Examples:

  • A plan was exempt on January 1, 2025, because the business was only 2 years old. Once the business completes its third full year of operation in 2025, automatic enrollment must be implemented by January 1, 2026.
  • A plan had 10 or fewer employees as of January 1, 2025. If your headcount reaches 11 employees during 2025, you must begin automatic enrollment by January 1, 2026.

Once a plan becomes subject to the mandate, the automatic enrollment provision must remain in place even if future circumstances (such as business downsizing) would have previously qualified the plan for an exemption.

What Is Automatic Enrollment?

Automatic enrollment is a plan feature that enrolls eligible employees at a default contribution rate unless they take action to:

  • Opt out of contributing
  • Select a different contribution amount

The goal is to encourage retirement savings by reducing friction and making enrollment the default choice.

What Happens If You Don’t Comply?

Automatic enrollment is a legally required provision for plans subject to SECURE Act 2.0. If you fail to implement it when required:

  • Your plan’s tax-qualified status may be at risk
  • You may face costly corrections

Correction Options

  • If automatic enrollment is missed, you have three years to make self-corrections, which include:
    • Making up missed employee deferrals and employer match contributions
    • Paying late interest
  • After three years, errors must be corrected through the IRS Voluntary Correction Program (VCP), which requires IRS approval.

Implementation Support from Ubiquity

If you are are subject to the automatic enrollment requirements of Secure Act 2.0 and you’re using Ubiquity’s bundled services:

  • We notified you prior to January 1, 2025 of the requirement to add* automatic enrollment provisions and provided instructions on how to do so.
  • We will reach out if we believe you no longer qualify for an exemption
  • We’ll generate and post your required automatic enrollment notices in the Documents + Forms section of your MyUbiquity.com account.
  • We’ll email participants a link to their notice.

When Are Notices Sent?

  • 30 days before an employee’s plan entry date or on their hire date (for plans with immediate eligibility)
  • 30 days before the beginning of the plan year

*If your plan already included automatic enrollment but you received a notice from Ubiquity, it means your current provisions did not meet SECURE 2.0 requirements and needed to be updated.

Will This Affect My Plan's Other Features?

No. Adding automatic enrollment will not change any other provisions of your 401(k) plan. Existing features like:

  • Employer matching contributions (safe harbor or discretionary)
  • Investment options
  • Vesting schedules

will remain unchanged unless you choose to update them separately.

Next Steps for Employers

  • Review your plan start date and business details to determine whether you’re exempt.
  • If your plan is not exempt, prepare to implement automatic enrollment by January 1, 2025 or the January 1 following the loss of your exemption.
  • Contact us if you’re unsure whether the mandate applies to your business or need help updating your plan.