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Allows retirement plans that use automatic enrollment to automatically reenroll employees who previously opted out, provided the opt-out period lasted at least one year but no more than three years. Reenrollment is permitted at a single, uniform contribution rate and the plan keeps its tax-qualified status unless the employee affirmatively opts out again. The rule amends the Internal Revenue Code and ERISA to authorize this automatic reenrollment and applies to plan years beginning after the law is enacted. Employers and retirement plan administrators must implement reenrollment procedures but may rely on a uniform contribution rate for all reenrolled participants.
Adds a new clause (v) to Internal Revenue Code section 401(k)(13)(C) titled “Periodic automatic deferral permitted,” stating that a qualified automatic contribution arrangement will not lose its qualified status solely because (I) an employee’s election to opt out ends after not more than 3 years (but not less than 1 year), and (II) the employee is treated as having elected the default contribution (is reenrolled) after that termination unless the employee makes a new affirmative election to opt out.
Amends clause (iv) of Internal Revenue Code section 401(k)(13)(C) by replacing the phrase “either to participate in the arrangement or not to participate in the arrangement” with “to participate in the arrangement.”
Provides a special rule allowing a “previously disregarded employee” to be treated as an employee who has made the election described in section 401(k)(13)(C)(ii)(I) for purposes of applying the amended Internal Revenue Code provisions.
Defines “previously disregarded employee” as any employee who was not taken into account under the Internal Revenue Code by reason of an election described in section 401(k)(13)(C)(iv)(II) (as in effect for plan years beginning on or before the date of enactment) to not participate in the arrangement described in section 401(k)(13)(C)(iv)(I).
Amends Internal Revenue Code section 414(w)(3) (eligible automatic contribution arrangements) by redesignating subparagraphs (A)–(C) as clauses (i)–(iii) and adds a new subparagraph (B) “Periodic automatic deferral permitted.” The new subparagraph provides that an arrangement will not lose eligible status solely because (i) a participant’s election not to have contributions made ends after not more than 3 years (but not less than 1 year), and (ii) the participant is treated as having elected to make contributions at the uniform percentage after that termination unless the participant makes a new election not to make contributions.
Amends subsection 414(w)(3) governing eligible automatic contribution arrangements by reorganizing subparagraphs and adding a new subparagraph that permits periodic automatic deferral/reenrollment.
Who is affected and how:
Retirement savers (employees): People who previously opted out of automatic-enrollment plans may be reenrolled and begin payroll contributions again at a uniform percentage. This increases retirement savings for some workers unless they opt out a second time. Reenrolled participants will see reduced take-home pay to the extent of the contribution.
Employers / Plan sponsors: Must amend plan documents, set a uniform reenrollment contribution rate, update payroll and enrollment systems, and provide required participant notices. Administrative burdens are modest but require operational updates. Employers that match contributions may see higher matching outlays as reenrolled employees contribute again.
Plan administrators and recordkeepers: Need to build or update systems and processes to identify eligible prior opt-outers, execute reenrollment at the uniform rate, process payroll withholdings, and manage opt-out requests. The uniform-rate rule simplifies operations compared with individualized rate setting.
Retirement plan ecosystem (financial institutions, advisors): May experience increased plan activity (more contributions) and modest demand for plan amendments, notices, and administrative services.
Overall impact:
Potential risks and tradeoffs:
Expand sections to see detailed analysis
Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
Introduced in Senate
Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
Introduced May 21, 2025 by Timothy Michael Kaine · Last progress May 21, 2025