Can employer require noncontributing employees to fill out a form stating they wish to make no deferrals?

[austin3515]

Can a sponsor require employees to fill out a form affirming the fact that they do not want to participate in a 401(k) Plan? The point would be to prevent that employee from coming back and suing for not being offered the Plan.

Any technical references would be ideal.

Thanks

[Guest Tinman42]

While I don't have any code section references, I know we have many clients that offer the plan and have the participant fill out an enrollment form with a 0% deferral rate. This seems to work well and for more than 15 years I've never heard of any problem with this.

[austin3515]

That makes a lot of sense.

Thanks!

[E as in ERISA]

If you're looking for "cites", you could look at the rulings on automatic enrollment. In those cases, an employer can clearly require a person to fill out a form in order to get zero taken out.

[Guest debic123]

Many of our employers use this as a means to insure that all employees were given the opportunity to defer. This prevents "you did not tell me I could participate" to be an issue down the road.

[david rigby]

... and for that reason is very common.

[mbozek]

There is no problem is getting employees to sign such a form- However the employer has to make sure that it keeps the form until the employee termintes to protect itself from a claim.

[Guest lmoiseyev]

In prior years, when living thru an IRS audit, they required proof that eligible employees had been given the opportunity to participate. If there was no waiver on file, we had to obtain one. I've made it a policy to either get an enrollment or a waiver (or zero % election). Better safe than sorry.

[Guest jmarini]

We are a TPA who has done Auto Enrollment into our Plans for many years now. Everyone is put into the Plan unless they sign a form changing their contribution rate to 0%. We keep these forms in-house (or in our warehouse after they become several years old).

[GBurns]

If you Auto Enroll people into a Plan, How do you determine how much they wish to contribute and what authorizes any salary reduction without a signed Salary Reduction Agreement? Enrollment/participation not being the same as contributing.

[R. Butler]

How do you determine how much they wish to contribute and what authorizes any salary reduction without a signed Salary Reduction Agreement?

The plan sponsor picks a default rate. The plans I've seen use between 1 & 3%. The participant is given a Salary Reduction Agreement. The Agreement explicitly states that if the form is not returned the default % will be withheld. The Agreement provides options for the participant to elect out or to choose a different deferral amount.

[david rigby]

The original questioner may wish to review any of several prior discussion threads about this topic. Try the Search feature, with "negative election" or "automatic enrollment".