Auto-enrolment is rapidly becoming a non-negotiable responsibility for U.S. employers. With the rollout of SECURE 2.0 Act provisions in 2025 and expanding state-mandated retirement programs, businesses—especially small and midsize—must understand their legal duties or risk penalties.
If you’re an employer with 10 or more employees, or you operate in a state like California, Illinois, or Oregon, this guide breaks down everything you need to know about auto-enrolment, why it matters, and how to stay compliant.
What Is Auto-Enrolment in the U.S.?
Auto-enrolment refers to the automatic enrollment of employees into a workplace retirement savings plan, such as a 401(k) or Roth IRA. Unlike traditional opt-in retirement plans, auto-enrolment means eligible employees are enrolled by default, with the option to opt out.
Origins & Federal Framework
Auto-enrolment was first popularized in the UK but gained traction in the U.S. through the SECURE Act (2019) and its enhancement—SECURE 2.0 Act (2022). By 2025, auto-enrolment is a federal mandate for many businesses offering new retirement plans.
Purpose
The aim is to boost retirement savings participation, particularly among low- to middle-income workers who may not voluntarily enroll.
Why Does Auto-Enrolment Matter for Employers in 2025?
- Legal Compliance
The SECURE 2.0 Act mandates that most new 401(k) or 403(b) plans established from 2025 onward must include automatic enrollment. - Employee Retention
Offering a retirement plan—especially one with auto-enrolment—can increase job satisfaction and loyalty, especially among millennial and Gen Z employees. - Tax Credits
Eligible small businesses may receive up to $5,000 annually for the first three years under the SECURE 2.0 small business startup credit. - Avoiding Penalties
Employers who fail to comply with federal or state requirements could face fines, audits, or exclusion from tax benefits.
Who Must Comply with Auto-Enrolment in 2025?
Under SECURE 2.0 Act:
- Employers starting new 401(k) or 403(b) plans from January 1, 2025
- 10 or more employees
- Operating for at least 3 years
Exemptions:
- New businesses under 3 years old
- Employers with 10 or fewer workers
- Churches and government entities
State Mandates (Examples):
| State | Program Name | Requirement |
| California | CalSavers | 5+ employees, enforced |
| Illinois | Illinois Secure Choice | 5+ employees |
| Oregon | OregonSaves | All employers |
| Colorado | Colorado SecureSavings | 5+ employees (2025 launch) |
| New York | NY Secure Choice (pending) | Expected 2025 rollout |
How Auto-Enrolment Works
- Default Enrollment: Eligible employees are automatically enrolled into a retirement plan
- Contribution Levels: Typically starts at 3% of wages, auto-escalating by 1% per year up to 10%
- Opt-Out Option: Employees must be notified and may opt out at any time
- Employer Duties:
- Set up a qualifying plan or register with the state plan
- Notify employees
- Manage payroll deductions
- File reports and track opt-outs
- Set up a qualifying plan or register with the state plan
Setting Up a Compliant Retirement Plan
Options for Employers:
- Traditional 401(k) with automatic features
- Roth IRA-based plans through state programs
- State-mandated plans (for non-participating employers)
Federal vs. State:
- Federal law applies to new plans with 10+ employees
- State laws fill gaps for employers not offering any plan
Registration Deadlines:
- Vary by state; California and Oregon enforce strict enrollment schedules
Employer Responsibilities Under SECURE 2.0 (2025)
- Auto-enroll new employees within 90 days
- tart contributions at 3%, escalating to at least 10% (up to 15%)
- Maintain records of opt-ins/opt-outs
- Integrate payroll to automate contributions
- Provide annual notices and updates to employees
States with Mandatory Auto-Enrolment Programs
| State | Current Status | Key Notes |
| California | Mandatory | CalSavers for 5+ employees |
| Illinois | Mandatory | Illinois Secure Choice |
| Oregon | Mandatory | OregonSaves for all sizes |
| Colorado | Active by 2025 | Employers with 5+ workers |
| Connecticut, Maryland, New Jersey, New York | Rolling out in 2025 | Varies by state |
Penalties and Risks of Non-Compliance
- IRS Penalties for failing to include auto-enrolment in new plans
- State-level fines (e.g., CalSavers: $250–$500 per employee)
- Loss of tax benefits for late or incorrect plan setup
- Reputational damage and possible employee lawsuits
Benefits of Auto-Enrolment for Employers and Employees
For Employers:
- Competitive advantage in hiring
- Tax credits up to $15,000 over 3 years
- Reduced financial stress = more productive staff
For Employees:
- Easier access to long-term savings
- Pre-tax or Roth contributions
- Compound growth through early participation
FAQs
Q1: Is auto-enrolment required in all U.S. states?
No, but many states are making it mandatory. Check your state’s program for details.
Q2: Can employees opt out of auto-enrolment?
Yes. Federal and state programs require a clear opt-out process.
Q3: How do I choose between a 401(k) and a state plan?
If you want more control and flexibility, a private 401(k) may be better. Otherwise, the state plan is low-maintenance.
Q4: What is the SECURE 2.0 deadline for small businesses?
Starting January 1, 2025, new 401(k)/403(b) plans must include auto-enrolment features.
Conclusion
Auto-enrolment isn’t just another HR trend—it’s a federal and state-backed movement reshaping retirement savings in the U.S. As a business owner, understanding your responsibilities in 2025 and beyond is vital to stay compliant, competitive, and supportive of your workforce.
🔍 Need help getting started? Download our free Auto-Enrolment Compliance Checklist or speak with a retirement plan advisor today.
