AICPA recommends prop. regs. changes for some retirement savings plans

The AICPA submitted comments to Treasury and the IRS recommending changes to proposed regulations (REG-100669-24) for automatic enrollment requirements for most newly established 401(k) and 403(b) retirement savings plans under the SECURE 2.0 Act.

SECURE 2.0 generally requires newly established 401(k) and 403(b) plans to automatically enroll eligible employees beginning with the 2025 plan year unless an employee opts out. A plan must automatically enroll the employee at an initial contribution rate of at least 3% of the employee’s pay and automatically increase the initial contribution rate by one percentage point each year until it reaches at least 10% of pay, an IRS news release said.

This requirement generally applies to 401(k) and 403(b) plans established after Dec. 29, 2022, the date SECURE 2.0 became law, except for new and small businesses, church plans, and governmental plans.

In January, the IRS issued proposed regulations (REG-100669-24) to implement the automatic enrollment provisions authorized in SECURE 2.0 in Sec. 414A. In its comment letter dated March 19, the AICPA recommended that the IRS issue final regulations that:

• Clarify that the investment requirements for trustee-directed plans in Prop. Regs. Sec. 1.414A-1(c)(4) do not apply to plans that do not adopt participant direction of investment.

• State that only employees of the plan sponsor are included in the count for purposes of determining status as a small business under Sec. 414A.

• Define the predecessor employer by reference to Regs. Sec. 1.415(f)-1(c)(2) for purposes of Sec. 414A(c)(4)(A).

Comments can be submitted through the Federal Register, and a public hearing is scheduled for April 8.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.