auto enroll required in 2025 for new plans

[gregburst]

I set up 2 plans in early December 2022 that became effective 1-1-23. Are these plans subject to the new auto enroll rules?

They were signed and "established" prior to 12-29-22, but not effective until 1-1-23.

[Belgarath]

My opinion only - such a plan would be subject to the auto enroll rules, absent another valid exception.

[Peter Gulia]

Internal Revenue Code of 1986 § 414A(c)(2)(A)(i) provides: “Subsection (a) [providing that an arrangement is not a § 401(k) arrangement unless it meets § 414A(b)’s automatic-enrollment requirements] shall not apply to—any qualified cash or deferred arrangement established before the date of the enactment of this section[.]”

Whether an arrangement was established before December 29, 2022 is a mixed question of law and fact.

To interpret what “established” means for § 414A(c)(2)(A)(i), there is no Treasury department rule or regulation, no IRS guidance, no court decision.

If an employer wants a prediction about whether a plan with facts like those described above will become subject to § 414A(b), the employer might want its lawyer’s or other tax practitioner’s written advice.

If 2025 arrives and there is yet no rule and no guidance, an employer’s good-faith reliance on an IRS-recognized practitioner’s written tax advice might support tax-return, information-return, and other reporting positions.

“There may be substantial authority for the tax treatment of an item despite the absence of certain types of authority. Thus, a taxpayer may have substantial authority for a position that is supported only by a well-reasoned construction of the applicable statutory provision.”

26 C.F.R. § 1.6662-4(d)(3)(ii) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR1d0453abf9d86e0/section-1.6662-4#p-1.6662-4(d)(3)(ii).