Automatic Enrollments

[Guest cjweber57]

After a plan implements automatic enrollments, do they need to provide participants with a notice of their right to make different elections? Will the SMM suffice, and if not, is there any guidance as to what this notice needs to say?

Also, would is there an annual notice requirement for this? Again, if there is, is there any guidance on what this notice needs to contain?

[austin3515]

I don't know, but if you go to google.com and type automatic enrollment 401(k) I suspect you'll find hundreds of good articles. People love to write about this one.

[MWeddell]

It's not very clear.

The annual notice requirement is in various revenue rulings and in an IRS General Information Letter issued in 1Q2004. However, the final 401(k) regulations omit this requirement. It's hard to know whether the final 401(k) regulations intentionally omitted the requirement given that the matter wasn't discussed in the supplementary information and given that the 2004 general information letter was released after the 401(k) proposed regulations (which didn't have the requirement either) were issued.

[E as in ERISA]

The DOL regulations describe what must be in the SMM:

http://www.dol.gov/ebsa/regs/fedreg/final/2004021591.htm

They must also get the 402(f) notice with the additional information about automatic rollovers:

http://www4.law.cornell.edu/uscode/26/402.html

There are examples of both on Corbel's web site.

No annual notice requirement.

[Guest qualified plan]

Katherine,

Is this thread about automatic rollovers or automatic enrollment?

[E as in ERISA]

April Fools!

[JanetM]

Make that Happy New Year.

[R. Butler]

After a plan implements automatic enrollments, do they need to provide participants with a notice of their right to make different elections? Will the SMM suffice, and if not, is there any guidance as to what this notice needs to say?

Also, would is there an annual notice requirement for this? Again, if there is, is there any guidance on what this notice needs to contain?

The regs. require that in order to be a qualified CODA, the employee must be given an effective opportunity to receive the amount in cash at least once a year. The determination on whether or not there has been an effective opportunity is determined on the basis of all facts & circumstances. I am not aware of any clear guidance on whether the SPD or an SMM is sufficient. I would generally err on the side of caution & issue some sort annual Salary Deferral Agreement. The Agreement is clear that any prior, including a negative election remains in effect until the participant modifies the election.