New auto enroll set up

[pmacduff]

An existing client roughly 2500 employees is adding auto enroll to the 401(k) plan. Plan entry dates are January 1 and July 1. The vendor recordkeeping the plan says that they need to have the upcoming eligible census data each year no later than May 31st for a July 1st entry due to timing issues and the auto enroll information they will be sending out to the newly eligibles.

The client has people hired in June of 2014 that are "borderline" as to whether or not they will make the 1000 hour requirement for eligibility by their anniversary date. We won't know until we have the census info for June, which of course is after the deadline of the vendor to set them up for July 1st entry.

Once we do know who met the eligibility the vendor still needs ~30 days to send out the notifications, which would put the new enrollees past the July 1st entry date.

I anticipate we're going to have this same issue each approaching future entry date due to the type of business this is and the employee demographics.

What's the best way for the client to handle this and have others seen this issue? Or am I missing something easy and obvious?

[GMK]

This looks messy with fixed entry dates. Maybe they could send conditional enrollment letters that say we will know in June if you met the 1000 hour requirement for eligibility, and if you meet it, then you will be automatically enrolled in the plan as of July 1 with the default elections unless you file an election form with your own election choices. That would give the 30 day notice. Follow-up letters in June would confirm whether or not the employees met the 1000 hours requirement.

Otherwise, I don't see how you do it, except to have a strange, but applicable policy that new hires cannot start working in June or December. No law against that, is there?

[pmacduff]

Thank you GMK - made me smile about the new hire rule

Anyway - that was my thought too - give out the info for those folks with the caveat that if they make the 1000 hours, they will be auto enrolled; otherwise not.

[K2retire]

I've run into similar issues with multiple recordkeepers. The really frustrating thing is that the recordkeepers all communicate with the clients as though their preferred solution is the correct and accepted way to solve the problem. One recently told the mutual client that they cannot send out the notice until the actual entry date, so no one will be automatically enrolled until 30+ days after they become eligible.

I'm curious to hear if anyone has run into an audit with a vendor using such procedures. It would be very helpful to point to that result when explaining to the client why I don't think the recordkeeper's solution is appropriate.