Automatic enrollment is a 401(k) plan feature intended to encourage all eligible employees to take advantage of their employer-sponsored retirement benefits. All Guideline plans include a version of an automatic contribution arrangement.

Generally, within 30 days before the plan start date or when an employee becomes eligible, they will receive an email notification with their auto-enrollment date. If employees do not either self-enroll or opt-out by the prescribed deadline, they will be automatically enrolled in their Guideline 401(k) plan.

All plans established on or after December 29, 2022, who don’t meet an exception to the mandatory automatic provisions (MAP) under the SECURE 2.0 act must include either an eligible automatic contribution arrangement (EACA) or qualified automatic contribution arrangement (QACA) provision, which are types of auto-enrollment plans.

Participants who are automatically enrolled will begin contributing at the default deferral rate and the assets will be invested into one of Guideline’s professionally managed portfolios based on their age and estimated timeline until retirement until they make an investment election. Employees can adjust their contribution amounts or opt out of the 401(k) plan at any time by logging into their Guideline dashboard.

Auto-escalation is a plan feature designed to enhance retirement savings rates, helping employees build a more secure financial future through consistent, incremental increases in their contributions.

With automatic escalation, participants who have been automatically enrolled (those who have not elected their own deferral rate or opted out) will have their deferral rates increased on an annual basis until a certain percentage has been reached.

For plans established on or after December 29, 2022, who don’t meet an exception to the mandatory automatic provisions (MAP) under the SECURE 2.0 act, the automatic escalation provision must go to at least 10% but no more than 15%.

For QACA plans established prior to December 29, 2022, or those that meet at least one of the MAP exceptions, the automatic escalation provision must go to at least 10% but no more than 15%.

A default deferral rate is a predetermined percentage of the employee’s compensation that is automatically withheld from each paycheck and contributed to their 401(k) account. The default rate applies only to eligible employees who either do not select their own contribution rate or fail to opt out of the plan prior to the deadline specified in their onboarding invitation.

For plans established on or after December 29, 2022, who don’t meet an exception to the mandatory automatic provisions (MAP) under the SECURE 2.0 act and all QACA plans, the default rate must be at least 3% but not more than 10%.

For plans established prior to December 29, 2022, or who meet at least one of the MAP exceptions and are not QACA plans, the default deferral rate can be as low as 1% and automatic escalation is not required.

The plan’s default contribution rate is defined in the plan’s document and you can find it in the Summary Plan Description.

Employees can change their contribution rate at any time by logging into their Guideline account, and clicking the “Change contribution” button on the main dashboard. Employees who prefer not to contribute can simply set their contribution amount to 0%.

If an employee is automatically enrolled, but did not wish to contribute to the plan, they may be eligible to receive a refund. To be eligible, the plan must include an eligible automatic contribution arrangement (EACA) or qualified automatic contribution arrangement (QACA) provision and a refund request must be made within 90 days of the first automatic contribution from payroll. This deadline is set by the IRS and no exceptions can be made.

Please refer to your plan document to see if your plan contains an EACA or QACA provision.