SECURE 2.0 Auto-Enrollment Requirement Takes Effect in 2025

Starting this year, SECURE 2.0 requires businesses with at least 10 employees to implement automatic enrollment and automatic contribution escalation for retirement plans established on or after December 29, 2022.  

These 401(k) and 403(b) plans must automatically enroll eligible employees at a minimum contribution rate of 3%, with annual auto-escalation of at least 1% until reaching 10% to 15%, unless employees choose to opt out. 

As auto-enrollment is becoming more prevalent—in use at 47.1% of all U.S. plans, according to the 2025 PLANSPONSOR Defined Contribution Plan Benchmarking Report, businesses are embracing the feature to combat employee complacency and boost participation in 401(k) plans, say experts. PLANSPONSOR, like PLANADVISER, is owned by ISS STOXX.  

Key industry leaders agree that recent policy changes under the SECURE 2.0 Act of 2022, along with technological advancements, have fostered a culture of retirement readiness among small and midsize businesses. 

Setting the Standard for Auto-Features  

Don Hammond, managing partner in Merit Financial Advisors, says SECURE 2.0 is reshaping the retirement savings landscape for small businesses. The enhanced tax credits and reduced administrative costs have sparked a surge in 401(k) plan startups. Now mandatory auto-enrollment continues to increase employee participation.  

“Employers are starting to embrace higher auto-enrollment levels, moving beyond the traditional 2-3% to 5-6% or higher,” he says. “This shift helps employees build meaningful retirement savings over time.” 

Shantel Nwanguma, vice president of customer onboarding at recordkeeper Human Interest, shares that all the company’s new plans adopt auto-enrollment.  

“We guide our clients through the process, showing them how employees enroll upon eligibility and providing the option to adjust their contributions,” she explains. 

Meanwhile, Steve Rubino, head of retirement at J.P. Morgan Asset Management, reveals that 75% of the plans on its recordkeeping platforms have adopted auto-enrollment, higher than the industry average. 

 According to the PLANSPONSOR Defined Contribution Plan Benchmarking Report, automatic enrollment usage varies significantly depending on plan size. It is only in place at 14.5% of plans with less than $5 million in plan assets and 24.3% of plans with between $1 million and $5 million in plan assets, compared with 75.6% of plans with more than $1 billion in plan assets, showing room for increased adoption.  

“For safe harbor plans in our turnkey solution for small businesses, we make auto-enrollment standard, with auto-escalation up to 10% of pay unless participants opt out,” Rubino says.  

The Role of Auto-Escalation 

According to Rubino, 53% of plans on J.P. Morgan’s platforms implement auto-escalation. He says complacency often prevents employees from increasing their contributions, while auto-escalation removes this barrier, helping participants steadily increase their savings without having to actively manage their deferrals. 

“We provide notification 30 days prior to the increase to ensure participants are well informed of their options while helping plan sponsors meet regulatory requirements,” says Rubino. “Generally, we’ve observed that, if companies do not auto-escalate, the entire plan [population] will sit at the rate at which they were defaulted.” 

Hammond reaffirms that auto-escalation is a complement to auto-enrollment, ensuring employees save enough to meet their retirement goals.  

“Most people need to save about 15% of their income for a successful retirement,” Hammond explains. “If you start auto-enrollment at 6% and add a 3% employer match, you’re still only at 9%. Auto-escalation bridges that gap over time.” 

Overcoming Resistance and Building Momentum 

Although the benefits of auto-enrollment are clear, resistance from some small business owners remains a challenge. According to Nwanguma, this reluctance often stems from concerns about administrative burdens or costs. However, enhanced tax credits under SECURE 2.0 and advancements in technology have alleviated many of these fears. 

“Auto-enrollment’s adoption by small business owners significantly enhances the retirement readiness of the American workforce,” Nwanguma says. “As these features become the standard, we see a positive impact on participation rates and savings habits.” 

Nwanguma recommends advisers understand client concerns and align the discussion with their goals. 

“We ensure employers know their employees can opt out and provide accessible processes to help them navigate their options,” she adds.  

Hammond agrees, emphasizing framing auto-enrollment as a benefit, not a burden. 

“It’s about helping employees help themselves,” he says. “Employers are essentially saying, ‘We’re here to support your retirement goals, but you have to make the conscious decision to opt out if you don’t want that help.’” 

A Stronger Retirement System 

The experts agree that the combination of auto-enrollment, auto-escalation and SECURE 2.0 incentives have already begun to transform the U.S. retirement system. Increased access to retirement plans, coupled with rising participation and saving rates, creates a more financially secure workforce. 

“Overall, access to a plan is increasing through state mandates and employer incentives from SECURE, [and] participation and savings are increasing,” Rubino says. “All of this, in combination, is creating a stronger U.S. retirement system.” 

Hammond expects these changes to yield major rewards down the line. 

“By the time employees reach their 30s, they’re well on their way to the 15% savings rate needed for a successful retirement, all without having to think about it,” he says. “It’s about automating the process to ensure better outcomes for everyone.” 

More on this topic:

	Keeping Up With SECURE 2.0 Changes
	Is SECURE 3.0 on the Horizon?