Trends and best practices for automatic programs

Automatic programs remain the most effective way to promote participation in voluntary savings programs like 401(k) plans and can help put employees’ inertia to work for them as they pursue retirement. The SECURE 2.0 Act requires all new 401(k) plans—adopted after the December 29, 2022, effective date—to include automatic enrollment at a rate between 3% and 6% and automatic increases up to a rate between 6% and 10%. While this is not required for plans established prior to that date, it is a signal from Congress that automatic programs are considered a best practice.

• If you implemented automatic enrollment for new hires only, consider retroactively auto-enrolling all employees to help increase overall plan participation.
• Set up automatic programs that allow increases in salary deferral rates beyond plan match to make a positive impact on retirement readiness without increasing employer costs.
• Aim for a total employee contribution rate of 12% to 15% including salary deferrals, plan matches and other contributions. For example:
  
  
  • For a plan that matches 25% of the first 6% of salary deferred, consider an automatic increase up to 10%.
  • For a plan that matches 100% of the first 6% of salary deferred, consider a maximum automatic increase of 6%.