Passive Enrollment

[Guest smc]

We are considering adding a passive 401(k) enrollment option for new hires beginning Jan. 1, 2002. Would be interested in practical ideas on how others have implemented passive enrollment in a fully outsourced 401(k) environment with weekly payroll frequencies. Would like to have the recordkeeper provide the "passive enrollment" notification and collect negative elections through IVR or internet, with no local HR involvement. Timing issues would seem to make elections effective on date of hire impractical, because pay may have already become "effectively available" in cash, to use the IRS' language, prior to notification from the recordkeeper, and the end of a reasonable election period. Has anyone designed a passive enrollment process for new hires that has a delayed effective date, such as "the automatic salary reduction becomes effective on the first day of the first payroll period of the second [or third] month following your hire date" as an example? Is there any problem with this design? Current plan provisions allow you to enroll as soon as administratively feasible following hire date. Any other practical experiences that anyone has dealt with?

[david rigby]

A few prior discussions:

http://www.benefitslink.com/boards/index.php?showtopic=9553

http://www.benefitslink.com/boards/index.php?showtopic=8500

http://www.benefitslink.com/boards/index.php?showtopic=7064

http://www.benefitslink.com/boards/index.php?showtopic=8581

[IRC401]

Have you decided how you are going to deal with the fiduciary issue of investing the employees' money? Negative elective elections don't have any 404© protection.