In a letter submitted to the Department of the Treasury and the Internal Revenue Service, the American Institute of CPAs has responded to proposed regulations related to automatic enrollment requirements authorized under SECURE 2.0.
The SECURE 2.0 Act generally 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 percent of their pay and automatically increase that contribution rate by 1 percent each year until it reaches at least 10 percent of an employee’s pay.
This requirement generally applies to 401(k) and 403(b) plans established after Dec. 29, 2022, the date the SECURE 2.0 Act became law, with exceptions for new and small businesses, church plans, and governmental plans.
Based on the recent proposed regulations, the AICPA recommends the following:
- Investment Requirements for Trustee Directed Plans – issue final regulations clarifying that the investment requirements set forth under Prop. Reg. § 1.414A-1(c)(4) are not applicable to plans that do not adopt participant direction of investment.
- 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 under section 414A.
- Definition of Predecessor Employer – issue final regulations that define predecessor employer by reference to Treas. Reg. § 1.415(f)-1(c)(2) for purposes of section 414A(c)(4)(A).
“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,” says Kristin Esposito, AICPA Director, Tax Policy & Advocacy.
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Tags: 401(k), internal revenue service, IRS, retirement, Taxes
