Auto Enrollment

[Guest perplexedbypensions]

Hi. Just looking for some opinions on this.

Let's say a plan uses auto enrollment, and has an escalator of 1% each year. Participants who do not respond with any elections are enrolled at 3%. The plan has one appropriate default fund, "Fund A".

The participant is auto enrolled. He makes an election to change his ongoing contributions from the default fund to Fund B. Does this election take him out of the group of auto enrolled participants subject to the escalator? Or when the escalator is applied, does his additional 1% need to be invested in Fund A?

We are not sure if only the election of changing the deferral percentage (either opting out or increasing) is the action that will take them out of auto enrollment status, or if changing the investment fund (but not changing the deferral amount) will also take them out of auto enrollment status.

Thank you very much for any input.

[JanetM]

What does the plan say? Are auto enrollment and default fund tied together. Say someone gets auto enrolled and elects something other then default. Not that they elected deferral, just the fund. Seems to me the auto enrollment increases would still apply. The flip side it someone who elects a deferral amount and allows it to go to defualt fund.

My take on this is the person is still part of auto enrollment group and subject to increases in future. Only an affirmative change in their deferral amount would take them out of the auto enrollment status.

[BG5150]

My take on this is the person is still part of auto enrollment group and subject to increases in future. Only an affirmative change in their deferral amount would take them out of the auto enrollment status.

But what if the participant was happy with her 3% deduction? Would she have to change it to 4% then change back to 3% to get out of that classification?

[RCK]

We've been using auto enrollment for years, without the autoescalation feature. But I know that we can differentiate an autoenrollment at 3% and an affirmative election at 3%.

So if we had an auto escalator, it would only apply to those who had never overriden their autoenrollment percentages.

And any investment elecitons they had made would have no impact on this. Or in other words, I agree with JanetM.