Sendmail should be linked against libsaslauth2.so

/etc/mail/sendmail.mc:

define(`confAUTH_OPTIONS', `A y')dnl
TRUST_AUTH_MECH(`LOGIN PLAIN CRAM-MD5')dnl
define(`confAUTH_MECHANISMS', `EXTERNAL GSSAPI DIGEST-MD5 CRAM-MD5 LOGIN PLAIN')dnl

/etc/sysconfig/saslauthd:

MECH=shadow

/usr/lib/sasl2/Sendmail.conf:

pwcheck_method: saslauthd
mech_list: LOGIN PLAIN