401(k) plan sponsors converting an existing plan to Gusto Retirement can use this article to understand why most plans must automatically enroll employees, and which automatic enrollment feature Gusto sets up for your plan at conversion.
Under federal law, most new 401(k) plans are required to automatically enroll employees who fail to make an affirmative election. You can find more information about the requirements, including which plans it applies to and which are exempt, in what are the mandatory automatic provisions under SECURE Act 2.0.
Note: Gusto Retirement requires that all plans include an automatic enrollment feature. We also only look at your plan's initial effective date to determine if you're subject to the federal automatic enrollment mandate. If you meet another exemption and want to be exempt, notify your Account Executive.
Which automatic enrollment feature Gusto sets up at conversion depends on what, if any, automatic enrollment feature your plan already has in place. Automatic enrollment comes in a few forms: a basic Automatic Contribution Arrangement (ACA), an Eligible Automatic Contribution Arrangement (EACA), and a Qualified Automatic Contribution Arrangement (QACA). You can read more about automatic enrollment here.
Important: Generally an ACA can be added at any time, but an EACA or QACA feature can only be added at the beginning of the plan year.
If your plan already has an EACA or QACA feature, for the most part those features carry over when your plan converts to Gusto. You don't need to add or change anything.
If your plan doesn't have an automatic enrollment feature, and your plan isn't otherwise exempt from the federal mandate, it adopts an EACA when you convert your plan to Gusto.
If your plan is exempt from the mandate and doesn't currently automatically enroll employees, Gusto adds a basic ACA feature when your plan converts. Gusto then upgrades your plan to EACA at the start of your next plan year.
You don't need to choose or set up an automatic enrollment feature yourself. Gusto looks at what your plan already has, and whether your plan is subject to the federal mandate, and sets up the right feature automatically as part of your conversion.
Check your plan document or talk with your plan's advisor for how automatic enrollment applies to your specific plan.
This information is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein.