Important Regulatory Update: Automatic Enrollment Changes Effective January 1, 2025
Effective January 1, 2025, section 101 of the SECURE 2.0 Act, mandates that 401(k) plans established after December 28, 2022, must include an automatic enrollment and an automatic deferral increase feature.
Automatic enrollment allows eligible employees to have a specified percentage of eligible wages deferred into their 401(k) account unless an affirmative or opt out election is made.
Automatic deferral increase, also known as auto-increase or auto-escalation, is a related but separate plan design feature which automatically increases the auto enrollment deferral rate by 1% annually when participants have made no affirmative or opt out election.
Participants will be notified of the plan change with a 45-day window to review the many retirement and financial planning tools available on the Voya website to understand how the ADP TotalSource Retirement Savings Plan (the “Plan”) may benefit them. They may opt out of participation or elect an alternative deferral percentage at any time. Additionally, participants may withdraw automatic enrollment contributions within 90 days of their first contribution date without penalty, although withdrawals may be subject to taxation.
The SECURE 2.0 Act requires 401(k) plans established after December 28, 2022 to have an automatic enrollment feature between 3% and 10% starting January 1, 2025. ADP TotalSource Group, Inc., as the sponsor and fiduciary of the Plan, has set a default automatic enrollment rate of 6%, with an auto deferral increase of 1% annually until a maximum of 15% is reached, unless the employee opts out or makes an affirmative election. The 6% default automatic enrollment rate was selected to align with best practices in retirement planning and to best support participants in building a stronger retirement savings foundation.
If your company’s 401(k) plan was established after December 28, 2022, it must include these features by January 1, 2025. ADP TotalSource will automatically amend your plan to include a default automatic enrollment rate of 6% with an auto deferral increase provision, requiring no action from you. If you prefer to set an initial automatic enrollment rate other than 6%, please inform your ADP TotalSource 401(k) Specialist by October 1, 2024.
For more information on how this change may affect your plan, please contact your dedicated 401(k) Specialist at 844-448-0325.
