The Auto Reenroll Act of 2023

One of the many provisions of the SECURE 2.0 Act of 2022 will require certain new 401(k) and 403(b) plans to auto-enroll employees beginning in 2025. Building off this, Sen. Bill Cassidy (R-LA), ranking member of the Senate HELP Committee; and Sen. Tim Kaine (D-VA) recently introduced the Auto Reenroll Act of 2023, a bill that would permit (not require) certain defined contribution plan sponsors to automatically reenroll non-participants at least once every 3 years, unless the individual affirmatively opts out again.

The primary purpose of the legislation is to assist American workers in taking advantage of their available retirement plans and full employer match. While most larger plans have implemented auto-enrollment, some employees still choose to not participate in their employer’s retirement plan or take advantage of the full employer match when starting out and making entry level wages. However, after opting out, many forget to join or increase their contribution as they move up in income, leaving significant money on the table. It is believed that the new bill will help more Americans take advantage of the retirement benefits offered to them and be more financially stable. The legislation would modify safe harbors in ERISA and the Internal Revenue Code to permit automatic reenrollment. In addition, plan sponsors would be permitted to sweep as a group everyone who meets the requirements for reenrollment, rather than on each employee’s enrollment date, and need only provide this reenrollment opportunity to those who are not participating in the plan at all. The proposed changes would apply for plan years beginning after the bill becomes law. Plans with existing reenrollment features would have relief from the new requirements for plan years starting before the bill’s enactment. It is not clear whether those plans would need to make changes for plan years starting after the legislation’s enactment. While retirement bills rarely pass Congress on their own, this one could very well be included in any bipartisan package of reforms that might take shape in the near future.

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