United States: Retirement and benefit provisions enacted, including mandatory auto-enrollment in new DC plans

Employer Action Code - Act

The Consolidated Appropriations Act, 2023 (CAA) was signed into law on December 29, 2022. The CAA incorporates various pieces of legislation with provisions affecting employer-provided retirement and benefit plans, including the SECURE 2.0 Act with over 90 retirement-related changes aimed at increasing plan participation, encouraging savings, and easing administration and compliance.

Key details

Some of the key changes under SECURE 2.0 are:

• Starting in 2025, employer-provided defined contribution (DC) retirement plans that are established after December 29, 2022, must automatically enroll new hires as participants. The employee contribution rate must be 3% to 10% of pay, automatically escalated at least one percentage point each year until it reaches at least 10% of pay (but not more than 15%). Employees may select a different contribution rate or opt out of enrollment.
• Beginning in 2024, employers will be permitted to make matching contributions to DC retirement plans based on “qualified student loan payments” made by employees for themselves or on behalf of their spouses or dependents. Where provided, such matching must be at the same rate as applies to employee elective deferrals (i.e., employee contributions); the same vesting rates must also apply. (Federal and private student loan debt totaled $1.7 trillion as of the third quarter of 2022, so employees may be particularly interested in this measure.)
• The age at which participants must begin taking required minimum distributions from their DC retirement accounts is increased to age 73 (from 72) in 2023 and then to age 75 in 2033.

For further details on the many SECURE 2.0 provisions, see this Insider article: SECURE 2.0 signed into law as part of 2023 federal spending package.

Non-retirement provisions of the CAA include:

• The safe harbor that allows high-deductible health plans coupled with a health savings account to provide pre-deductible coverage of telehealth services is extended for plan years starting after 2022 and before 2025.
• The Pregnant Workers Fairness Act requires employer accommodations for qualified employees affected by pregnancy, childbirth or related medical conditions.
• The PUMP for Nursing Mothers Act extends protections for nursing mothers under the Affordable Care Act (ACA) to salaried employees and certain other employees who were not covered under the ACA, and provides that time spent expressing breast milk is treated as work time.

Employer implications

The CAA’s many retirement and benefit provisions range from general new mandates to detailed administrative changes. Employers should work with their legal and other advisors to understand how the new requirements and opportunities may affect their plans and their employees.