SECURE 2.0 2025 auto-enrollment applying to LTPT employees?

It doesn't seem to me that the guidance specifically addressed whether the 2025 auto enrollment requirements must apply to LTPT employees? In the absence of a regulatory dispensation, it seems like the safest procedure would be to have auto-enrollment apply to them, as ridiculous as that seems. Thoughts on this issue?

15 minutes ago, Belgarath said:

It doesn't seem to me that the guidance specifically addressed whether the 2025 auto enrollment requirements must apply to LTPT employees? In the absence of a regulatory dispensation, it seems like the safest procedure would be to have auto-enrollment apply to them, as ridiculous as that seems. Thoughts on this issue?

Absent specific guidance that says "LTPTEs are not subject to auto enrollment", I don't see an argument for why it wouldn't apply.

I'll also throw in that at least two sessions at ASPPA Annual made this point  I believe one was Kelsey Mayo in a general session but don't quote me on it.

Some plans’ administrators might distinguish between employees who become LTPT-eligible on or after January 1, 2025 (or the later effective date of the new cash-or-deferred arrangement) and those who became LTPT-eligible before 2025 (or the later effective date of the new cash-or-deferred arrangement).

Consider this BenefitsLink discussion: https://benefitslink.com/boards/topic/71407-auto-enrollment-for-new-plans-auto-enroll-everyone-or-new-hires/.

American Retirement Association’s February 20, 2024 letter to the Internal Revenue Service “recommends” the IRS “Confirm that the mandatory [eligible automatic-contribution arrangement] applies only for employees who are enrolled in the plan on or after the plan becomes subject to the [I.R.C. § 414A] mandate.” And: “ARA recommends the Service provide that the automatic enrollment need only apply to participants who enter the plan after the effective date of the plan’s EACA provision in order to provide small employers with the maximum flexibility to comply with the mandate.” https://araadvocacy.org/wp-content/uploads/2024/02/ARA-Comment-re-Notice-2024-02-SECURE-2.0-Grab-Bag.pdf.

I have not formed any interpretation of Internal Revenue Code § 414A. (I have no client with a cash-or-deferred arrangement not established before December 29, 2022.)

Perhaps some customary practices might emerge from whether recordkeepers’ and third-party administrators’ software tools can identify for an automatic-contribution arrangement those who became eligible before the cash-or-deferred arrangement began or begins.

As @RatherBeGolfing noted, this topic came up in a few of the presentations at ASPPA National.  The consensus response was to apply the plan's eligibility rules and if an employee or LTPTE is eligible to make deferrals on 1/1/2025, then they should be subject to auto-enrollment.

The topic of whether all eligible employees should be auto-enrolled or only newly eligible employees could be auto-enrolled often was paired the LTPTE question.  The consensus response was, absent explicit guidance, to at least follow the plan rules (or permissible plan rules) where the plan would honor existing affirmative elections that differ from the auto-enrollment minimum, but applying auto-enrollment all eligible employees on 1/1/2025 was an administrative fail-safe approach. It was acknowledged that we are a little more than a month away from the deadline to send to participants annual notices for the 2025 plan year, and this could be an administrative challenge for some plans.

Paul I mentions an important reminder: It’s now no more than 23 business days before December 2.

(It might be fewer if an employer or its service provider treats Election Day or Veterans Day as a holiday. Veterans Day is a holiday for Federal and many State and local government employees, and for businesses that follow Federal, rather than New York Stock Exchange, holidays.)

Have recordkeepers yet programmed the computers for which people (maybe including LTPT employees) to send an automatic-contribution arrangement’s opt-out notice to?

Or, does a recordkeeper leave it to its customer, an employer/administrator, to decide which people to send a notice to?

And if a recordkeeper leaves it to the plan’s administrator, does that practically mean its third-party administrator?

Our concern was for our non-safe harbor ACA plans that rely on the additional ADP/ACP testing window.  Our recommendation was to take the conservative approach that LTPTs should be included in the covered group so as to not possibly lose the extended testing period.

1 hour ago, Gilmore said:

Our concern was for our non-safe harbor ACA plans that rely on the additional ADP/ACP testing window.  Our recommendation was to take the conservative approach that LTPTs should be included in the covered group so as to not possibly lose the extended testing period.

And all participants without an affirmative election need to be auto-enrolled.  Cant use participants who enter on or after xx/xx/xxxx if you want the extended testing window.