Automatic Enrollment

[DTH]

Hi.

ERISA supersedes state payroll withholding laws with respect to plans that add an automatic enrollment arrangement. Governmental 457(b) plans are not subject to ERISA, so the ERISA preemption rule does not apply.

If a 457(b) plan adds an EACA under the Internal Revenue Code, does this preempt them from the state payroll withholding laws?

Thanks!

[John Feldt ERPA CPC QPA]

No it does not. But has this issue ever been in court in your state? It's still the employee's money, regardless of where it went. So I don't think any state enforcement branch would care to spend any time on the issue of auto-enroll, regardless of their stated law (I could be wrong though).

[J Simmons]

Section 902(f) of the Pension Protection Act of 2006 added subsection (e) to ERISA section 514. It provides that ERISA Title I "shall supersede any law of a State which would directly or indirectly prohibit or restrict the inclusion in any plan of an automatic contribution arrangement." Then it goes on to define an ACA (automatic contribution arrangement).

I suspect that J4KFBC's answer is based on the facts that ERISA 514(e) is part of Title I and Title I does not apply to governmental plans. ERISA 4(b)(1). That makes sense.

It would be an attenuated argument, but perhaps the language of ERISA 514(e) could be viewed to apply, as it reads, to "any plan of an automatic contribution arrangement". It does not have familiar statutory language such as "any plan subject to this title".

If you are in the planning phase, I'd go with J4KFBC's position. If you have operated as such and are now being challenged by the state payroll enforcement agency, I'd at least argue that "any plan" means "any plan".