Auto enrollment in retirement plans soon mandatory?
Auto enrollment in retirement plans would be required under new legislation.
The Securing a Strong Retirement Act of 2022 passed the House on March 29, 2022. The Senate has the legislation now.
As currently written, HR 2954 allows employees to opt out of auto enrollment in 401(k) and 403(b) plans. For anyone who doesn’t do that:
- in the first year of participation in new plans, the contribution rate would be between 3% and 10% of their compensation, and then
- on the first day of each plan year, the rate would increase by 1% until reaching 10%, but not more than 15%.
Higher catch-up limit for retirement plans
The 2022 bill has other provisions, including increasing the catch-up contribution limit.
Employees age 62 to 64 could contribute an extra $10,000 per year.
For tax year 2022, catch-up contributions are set at $6,500.
The law’s changes would kick in during 2023 and 2024.
Another law in effect already
An earlier law, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), also brought changes involving employer-sponsored retirement plans.
Under the SECURE Act, employers can’t exclude employees who complete at least 500 hours of service per year from participation in retirement plans. The employees have to put in the 500 hours for three, consecutive 12-month periods.
If you haven’t started counting yet, consider getting started now. The clock started ticking on this provision on Jan. 1, 2021.
The SECURE Act doesn’t require employers to make contributions for the eligible part-time workers. However, you’d have to allow those employees to make contributions through salary deferrals.
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