Automatic Enrollment

[Guest terric]

What is the industry standard percentage withheld for automatic enrollment?

[Guest terric]

Any input would be greatly appreciated...

[Archimage]

There is no standard (that I am aware of). I have seen various percentages in plans that was placed to meet the clients' need.

[Guest terric]

We are just trying to get a general idea of what others have been doing. Is there an approximate percentage that most of your plans use or do you try and target a certain percentage to ensure that the ADP testing passes?

Thanks.

[WDIK]

Although slightly outdated, the following link may be of interest to you.

http://www.401khelpcenter.com/benchmarking.html

[alexa]

We are just trying to get a general idea of what others have been doing. Is there an approximate percentage that most of your plans use or do you try and target a certain percentage to ensure that the ADP testing passes?

Thanks.

Hewitt, our consultant, did a survey for us

Out of 81 plans reporting the followign stats:

1% rate 6%

2% rate 28%

3% rate 49%

4% rate 9%

5% rate 3%

6% rate 5%

We will be implementing either 2 likely 3% for a potentail 7/1 rollout

For anyone out there who has implemented autoenrollment , do you have any recommedations?

What was your avergae time to roll out? thanks

[E as in ERISA]

The examples in Rev. Rul. 2000-8 used three percent. Some may have assumed that was required. Because in its 2004 information letter to Mark Iwry the IRS clarified that any percentage was allowed. However, the pension bill in conference would probably require a three percent minimum for the discrimination safe harbor.

[RCK]

We started in 1999 at 2%, and moved to 3% in 2003. We did not sweep backward with either of these--both were prospecive only.

If I had it to do over again, I'd start at 3% with an automatic 1% annual escalator until you get to wherever your match maxes out.

And the most common investment is still a Stable Value fund, but I'd consider a Balanced/Life Cycle/Life Style fund.

There is substantial participant inertia with autoenrollment, as to both deferral percentage and investment elections. So where you auto enroll them is where they are going to stay.

And no matter how much you deny this, they are going to think that your defaults are recommendations, and they will be able to retire on that 2% into a Stable Value Fund

[Lame Duck]

My client has a question about the automatic escalator provision. We know that we can make automatic deferrals and the escalation provisions applicable to all participants. The cleint uses a 1% base and 1% escalator. The client wants to know if and when the escalator would apply to a participant who is currently deferring an amount greater than the base automatic deferral. Assume that the participant is deferring 4% of compensation. Would the escalator increase that to 5% on the next escalation date or would it not come into play until the 5th escalation date applicable to the particiant. Thanks for your help.

[BG5150]

Automatic escalators only apply to those who are auto-enrolled. Once a participant makes an affirmative election on his or her deferral, they are then out of the auto deferral group and should not be automatically increased.

[EMarie]

Does anyone know if you can amend a 401(k) Plan to stop auto enroll and what is required ie notice etc.. I can't seem to find anything regarding stopping the auto enroll. I have a client who woudl like to stop auto enroll effective for the next plan year 1/1/2014.

[Lou S.]

I know of nothing prohibiting the elimination of automatic enrollment. Seems a simple plan amendment could address it though you might want to be clear whether if it applies only to new employess or removes the auto enrollment for folks who don't have any election.