Automatic Enrollment in 401(k) Plan in California

[Guest Seth_McNamee]

Is it possible to implement automatic enrollment in a 401(k) Plan for employees in California. I know that California does not support automatic enrollment.

Does anyone know how other employers are circumventing California's harsh stance on this issue?

I think that if we try to have every employee sign a sheet of paper acknowledging that they consent to being enrolled, then we would be OK. This goes against the theory of "automatic" enrollment, but I think that it's necessary in California. Any thoughts? Any ideas as to what this acknowledgement should say?

Thanks.

[mbozek]

Some employers claim Cal law is preempted by ERISA because it effects the funding of the plan. DOL has ruled that NY and PR laws statutes requiring employee consent to salary reduction are preempted. The US Sup ct in Ingersoll-Rand v. McClendon, 111 S.Ct 478, held that state laws holding employer liable for violating employee's rights were preempted when employer action relates to operation of an ERISA plan.

[Harwood]

The Ingersoll-Rand case is from 1990. The ERISA Outline Book says that recent Supreme Court cases are tending towards less pre-emption of state's rights.

[Guest Seth_McNamee]

Thanks for the replies.

I think that we have decided to go ahead and draw up an acknowledgement and have employees sign it - just to be safe.

Does anyone have any suggestions as to what the acknowledgement should say?

[mbozek]

I think the book needs to be revised. The sup ct held this year that state laws could not impose liability on health plans that denied treatment which was not allowed under the terms of the plan. And a few years ago the ct held that state law revoking a spouse as bene under an ERISA plan upon divorce was preempted. The Ct has been consistent in preempting state laws that affect plan operation.