The SECURE 2.0 Act of 2022 has introduced significant changes to retirement plan administration, particularly regarding automatic enrollment. These changes, primarily codified in the new IRC Section 414A, mandate that certain retirement plans automatically enroll eligible employees. This article will delve into the proposed regulations (REG-100669-24) that provide guidance on these new requirements.

Core Changes Introduced by the SECURE 2.0 Act

The SECURE 2.0 Act, enacted on December 29, 2022, brought about several key modifications to the rules governing retirement plans. Among these, Section 101 of the Act introduced Section 414A to the Internal Revenue Code (Code), which mandates automatic enrollment for specific retirement plans. The proposed regulations, issued by the IRS and the Department of the Treasury, interpret and implement these statutory changes. Additionally, the Act included provisions related to the consolidation of notices, which impact how plan sponsors communicate with participants.

Automatic Enrollment Requirements Under Section 414A

A central element of the new rules is the requirement that certain cash or deferred arrangements (CODAs), described in section 401(k), and salary reduction agreements under section 403(b) must be structured as eligible automatic contribution arrangements (EACAs). An EACA is defined under Section 414(w)(3) as an arrangement that automatically enrolls participants with a uniform percentage of compensation until they specifically elect otherwise.

Applicability of Automatic Enrollment

CODAs: A CODA will not be considered a qualified CODA under section 401(k) unless it complies with the automatic enrollment requirements outlined in section 414A. This is determined on a plan year basis.
Section 403(b) Plans: Similarly, an annuity contract purchased under a salary reduction agreement under a 403(b) plan will not be treated as purchased under a 403(b) plan unless the plan satisfies section 414A.
EACA Requirements: To satisfy the automatic enrollment requirements of Section 414A, a plan must operate as an EACA that meets the following additional conditions.

Key EACA Provisions:

Permissive Withdrawals: The EACA must permit employees to make permissive withdrawals of default elective contributions and attributable earnings within 90 days of the first default contribution. This is in accordance with section 414(w)(2) and described in §1.414(w)-1(c).
Minimum Default Contribution Percentages: The initial default contribution must be a uniform percentage between 3% and 10% of compensation. The default percentage increases by one percentage point annually, after each completed year of participation, up to at least 10% and no more than 15%.
- The employee’s “initial period” begins when the employee is first eligible to make contributions and ends on the last day of the following plan year.
- The proposed regulation adopts the exceptions from the uniform percentage requirement of section 414(w)(3)(B), which are based on the similar exceptions from the uniform percentage requirement for a QACA under §1.401(k)-3(j)(2)(iii).
Investment Requirements: Default contributions must be invested according to Department of Labor regulations at 29 CFR 2550.404c-5 if the participant doesn’t make an investment election.
Employee Coverage: The EACA must cover all employees eligible to make contributions under the plan. This includes long-term, part-time employees described in section 401(k)(15) or section 202(c) of ERISA. The proposed regulations do, however, include an exception to automatic enrollment for certain employees who had an affirmative election in effect (that remains in effect) on the date the plan first became subject to the automatic enrollment requirements.

Exceptions to Automatic Enrollment Requirements Under Section 414A

The proposed regulations outline several exceptions to these automatic enrollment mandates as described in section 414A(c). These include:

SIMPLE 401(k) Plans: SIMPLE 401(k) plans, described in section 401(k)(11), are exempt from these requirements.
Governmental and Church Plans: Governmental plans, as defined in section 414(d), and church plans, as defined in section 414(e), are also excluded.
New and Small Businesses:
- New Businesses: A plan is exempt if the employer (and any predecessor) has been in existence for less than three years. The proposed regulations clarify that a plan won’t fail to meet the automatic enrollment requirements if the EACA is implemented by the first plan year that begins on or after the third anniversary of the employer’s existence.
- Small Businesses: A plan is exempt before the first plan year that begins at least 12 months after the close of the first taxable year in which the employer ‘normally employed” more than 10 employees. The number of employees is determined using the rules of Q&A-5 of §54.4980B-2. That Q&A indicates that “an employer is considered to have normally employed fewer than 20 employees during a particular calendar year if, and only if, it had fewer than 20 employees on at least 50 percent of its typical business days during that year.”[^1] As well “[a]ll full-time and part-time common law employees of an employer are taken into account in determining whether an employer had fewer than 20 employees…”[^2]
- Multiple Employer Plans: For multiple employer plans, the new and small business exceptions are applied on an employer-by-employer basis.
Pre-Enactment Plans:
- General Exception: A qualified CODA or a 403(b) plan established before December 29, 2022, is generally exempt. For a CODA, this date is based on when the plan terms were initially adopted, even if effective later. For a 403(b) plan, this date is based on the date of initial adoption of the plan itself, and does not depend on when salary reduction agreements were adopted.
- Merger Rules: The rules surrounding plan mergers are complex and are laid out in detail in the proposed regulation. Generally, the merger of a pre-enactment plan with another plan will not affect the plan’s pre-enactment status. However, when a plan established on or after the enactment of section 414A is merged with a pre-enactment plan, the merged plan generally will not be treated as a pre-enactment plan. Special rules apply in the case of mergers in connection with transactions described in section 410(b)(6)(C) or involving multiple employer plans.
- Adoption of Multiple Employer Plan: The rules regarding an employer adopting a multiple employer plan after December 29, 2022 are also complex. Generally, if an employer adopts a multiple employer plan after this date, the multiple employer plan will not be treated as a pre-enactment plan with respect to that employer. Special rules apply for pre-enactment plans that are merged into a multiple employer plan.
- Plan Spin-offs: If a portion of a pre-enactment plan is spun off, the resulting plan is treated as a pre-enactment plan.
- Other Plan Amendments: Amendments to a plan that do not relate to adopting a multiple employer plan or a plan merger will not cause a plan to lose its status as a pre-enactment plan.

Interaction of Automatic Enrollment with Other Plan Features

Pension-Linked Emergency Savings Accounts (PLESAs):

An affirmative election to contribute to a PLESA is considered an affirmative election under the CODA.
Automatic contributions to a PLESA generally cannot be used to satisfy the automatic enrollment requirements of section 414A because they will not satisfy the investment requirements of section 414A(b)(4).

Changes to Notice Requirements Under Section 414(w)

The proposed regulations also include changes to regulations under section 414(w) to reflect other changes made by the SECURE 2.0 Act.

Unenrolled Participants:

Section 320 of the SECURE 2.0 Act added section 414(bb) to the Code, which provides that plans do not need to furnish certain documents to unenrolled participants if certain conditions are met.
Under the proposed regulations, an unenrolled participant does not have to receive the annual EACA notice under section 414(w)(4) as long as they receive (1) an annual reminder notice of their eligibility to participate and any applicable election deadlines and (2) any other plan documents they request.
An unenrolled participant is an employee who is eligible to participate in a defined contribution plan, has received required initial disclosures and notices about their eligibility, and is not actually participating.

Consolidation of Notices:

The SECURE 2.0 Act allows for the consolidation of certain notices required under ERISA and the Code.
The EACA notice under section 414(w)(4) can be combined with notices under section 404(c)(5)(B), 514(e)(3) or 801(d)(3)(A) of ERISA, and notices under sections 401(k)(12)(D) or 401(k)(13)(E) of the Code.
Combined notices must still include all required content, be clear, be furnished at the required times, be easy to understand, and highlight the primary information required for each notice.
The Department of Labor has provided guidance on the consolidation of notices in Q&A-18 of "FAQs: Pension-Linked Emergency Savings Accounts".

Applicability Dates

Statutory: The automatic enrollment requirements of section 414A apply to plan years beginning after December 31, 2024.
Regulatory: The proposed regulations will apply to plan years that begin more than 6 months after the date that final regulations under section 414A are issued.
Interim Compliance: For plan years beginning after December 31, 2024, but before the applicability date of the final regulations, a plan will be considered in compliance if it operates in accordance with a reasonable, good faith interpretation of section 414A.

Other Key Items

Multiemployer Plans: The proposed regulation clarifies that the phrase “a plan maintained by more than one employer,” as used in section 414A(c)(2)(B) refers to a multiple employer plan and not to a multiemployer plan or a plan maintained by members of a controlled group.
Request for Comments: The Treasury Department and the IRS are seeking public feedback on several issues including the definition of “predecessor employer” under section 414A(c)(4)(A) and the criteria for an “unenrolled participant” under section 414(bb)(2).

Conclusion

These proposed regulations are complex but offer important guidance on implementing the automatic enrollment requirements of the SECURE 2.0 Act. CPAs advising retirement plan sponsors should be aware of these changes to ensure their clients’ compliance. While the proposed regulations are not yet binding, they provide a clear roadmap for what the final rules are likely to be. Therefore, plan sponsors should begin working toward compliance now, using the proposed regulations as a reasonable interpretation of the law in the interim.

Resources Cited

Department of the Treasury, Internal Revenue Service, 26 CFR Part 1, [REG-100669-24], RIN 1545-BR08, Automatic Enrollment Requirements Under Section 414A.
SECURE 2.0 Act of 2022, Public Law 117-328, 136 Stat. 4459 (2022)
29 CFR 2550.404c-5

The Proposed Regulations are available via this link: https://public-inspection.federalregister.gov/2025-00501.pdf

Prepared with the assistance of Notebook LM which was provided the proposed regulations as its source.

[^1]: Treasury Reg. §54.4980B-2, Q&A 5, A5(b)

[^2]: Treasury Reg. §54.4980B-2, Q&A 5, A5(c)