26 U.S.C. § 414A — Requirements related to automatic enrollment

(a) In general. Two kinds of retirement arrangements must meet the automatic-enrollment rules in subsection (b), unless an exception in subsection (c) applies: (1) a "cash or deferred arrangement" under section 401(k) — the standard 401(k) setup — does not count as qualified unless it meets those rules; and (2) a section 403(b) annuity contract bought through a salary reduction agreement does not count as a proper 403(b) arrangement unless its agreement meets those same rules.

(b) Automatic enrollment requirements.

(1) In general. An arrangement meets this subsection if it is an "eligible automatic contribution arrangement," as defined in section 414(w)(3), and it also meets paragraphs (2), (3), and (4) below.

(2) Allowance of permissible withdrawals. The arrangement must let employees take "permissible withdrawals," as defined in section 414(w)(2) — a way to get automatically enrolled money back out.

(3) Minimum contribution percentage. (A) In general: in the employee's first year in the arrangement, the plan must automatically contribute a uniform percentage of pay that is at least 3% and no more than 10% — unless the employee^* specifically chooses not to contribute, or chooses a different percentage. Starting on the first day of each following plan year, that percentage must go up by 1 percentage point, until it reaches at least 10% but never more than 15% — again, unless the employee elects out or elects a different amount. (B) Initial reduced ceiling for certain plans: for most of these arrangements, for plan years ending before January 1, 2025, the top end of that automatic increase is capped at 10% instead of 15%. This lower cap does not apply to arrangements that already meet the special safe-harbor rules in section 401(k)(12) or (13).

(4) Investment requirements. Money that goes in automatically, and that the employee has not chosen how to invest, must be invested the way federal rule 29 CFR 2550.404c-5 (or whatever regulation replaces it) requires.

(c) Exceptions. Several kinds of plans do not have to follow subsection (a) at all:

(1) Simple plans. "Simple" 401(k) plans, as defined in section 401(k)(11), are exempt.

(2) Exception for plans or arrangements established before enactment of section. (A) In general: subsection (a) does not apply to a 401(k) cash-or-deferred arrangement, or a 403(b) annuity contract, that was already set up before this section became law. (B) Post-enactment adoption of multiple employer plan: that exception disappears for an employer who joins a plan shared by more than one employer after this section became law — that employer must follow subsection (a) as if it were running its own separate plan.

(3) Exception for governmental and church plans. Subsection (a) does not apply to a governmental plan^* (as defined in section 414(d)) or a church plan^* (as defined in section 414(e)).

(4) Exception for new and small businesses. (A) New business: subsection (a) does not apply while the employer running the plan (counting any predecessor employer) has existed for less than 3 years. (B) Small businesses: subsection (a) does not start applying until 1 year after the end of the first tax year in which the employer normally had more than 10 employees. (C) Treatment of multiple employer plans: when several employers share one plan, (A) and (B) are applied separately to each employer, and every employer that subsection (a) does apply to is treated as if it maintained its own separate plan for purposes of this section.