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Pension Protection Act 2006-Mandatory Contributions


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The proposed Pension Protection Act of 2006 contains provisions that clears the disparity between ERISA and state payroll laws related to automatic enrollments. The disparity was that certain states prohibit the withholding of payroll without the employee's consent. In clearing up the disparity, the Act contains an omission concerning mandatory contributions which could be viewed as creating a violation.

I'm with a non-profit that has a 403(b). The contribution structure includes an irrevocable election. Eligible employees must make a decision to contribute during the first 60 days of employment. Once they begin contributing, the must continue for their full period of employment or re-employment. For those eligible employees who elect not to contribute, after five years they will be automatically enrolled and participation must continue so long as they remain employed. Contribution levels are 2% of wages (employer contribution of 7.5% of wages into a 401(a)) below the Social Security Wage Base and 4.7% above (employer contribution of 10.5% into a 401(a).)

I am looking for feedback/opinions concerning the mandatory irrevocable election of our plan structure and the proposed legislation. Is this omission viewed as creating a conflict with our plan? If so, any suggestions of how this could be resolved while maintaining our plan's structure?

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