Retirement Rule Change: Multiemployer Plans Exempted from Mandatory Automatic Enrollment Starting 2025

This bill amends the Internal Revenue Code (IRC) to create a specific exemption for multiemployer retirement plans, freeing them from the requirement to automatically enroll new employees. Essentially, this change means these plans—which often cover workers in industries like construction, transportation, or mining, typically negotiated through collective bargaining—will no longer be legally obligated to use the 'opt-out' system that’s become standard in many corporate 401(k)s. This provision is set to take effect for all tax years beginning after December 31, 2024.

The Fine Print: What’s a Multiemployer Plan?

Before we dive in, let’s clarify. A multiemployer plan isn't just one company’s retirement fund; it’s typically sponsored by more than one employer and a union, governed by a joint board of trustees. Because they cover a highly mobile workforce—think a carpenter who works for three different contractors in a year—their administrative structure is already complex. The current automatic enrollment rules (IRC Section 414A) were designed to boost participation by making saving the default action. If you started a new job, money would start going into your 401(k) unless you actively opted out. This bill carves out multiemployer plans from having to do that.

Administrative Relief vs. Lost Savings

For the plan administrators and the employers contributing to these funds, this exemption offers a clear benefit: administrative simplicity. Dealing with the paperwork and compliance of mandatory automatic enrollment for a workforce that frequently changes employers and hours can be a logistical headache. Removing this mandate allows these plans the flexibility to manage enrollment in a way that better suits their unique structure, potentially saving on compliance costs.

However, the flip side hits the individual worker. The whole point of automatic enrollment is behavioral economics: people are more likely to stick with the default option. If you’re a new worker—say, an apprentice electrician—and you are automatically enrolled, you start saving immediately. If the plan is exempt, the burden shifts entirely back to the employee to actively fill out paperwork and choose to start saving. For busy people juggling new jobs, families, and expenses, that extra step is often enough to delay or prevent them from starting retirement savings, potentially impacting their long-term financial security. While this bill provides administrative relief for the plan, the practical effect might be lower participation rates among the workers it’s designed to serve.