participants not returning forms when electing not to defer

[AlbanyConsultant]

After years of being a client and after being told about the dangers of this situation several times, the HR manager of a plan with ~500 employees with decent turnover and short eligibility (they need it to stay competitive) admitted that she has a hard time getting back the deferral election forms from people who choose not to defer (the only other contribution is a non-SH match) and is asking how to best protect herself.

While I love the simplicity of it, I presume holding back paychecks until the form is returned is out of the question ("But I can't pay you until I know what you want deferred!").

I'm thinking that having the employee sign something when given the deferral election form could help show an auditor that even if the forms weren't returned, that the participants were at least notified and given the opportunity.

Any other ideas?  Let's assume that automatic enrollment is not an option for them.  Thanks.

[justanotheradmin]

I'm not sure what your question is - 

Is she concerned employees will claim that they were never offered the ability to make deferrals?

Sounds like the plan does not have automatic enrollment - 

She gives them the enrollment forms or instructions - then she process payroll as normal unless they turn in a deferral form. Some ERs make a note of when then provided the forms (and how, paper, e-mail etc) so that they can document that there was no missed opportunity to defer. But if the participant doesn't turn in a form - there is no deferral. She doesn't need a form saying ZERO to proceed with ZERO deferral. 

Getting a ZERO election form returned is of course best practice - but it's not required. 

[Larry Starr]

49 minutes ago, justanotheradmin said:

I'm not sure what your question is - 

Is she concerned employees will claim that they were never offered the ability to make deferrals?

Sounds like the plan does not have automatic enrollment - 

She gives them the enrollment forms or instructions - then she process payroll as normal unless they turn in a deferral form. Some ERs make a note of when then provided the forms (and how, paper, e-mail etc) so that they can document that there was no missed opportunity to defer. But if the participant doesn't turn in a form - there is no deferral. She doesn't need a form saying ZERO to proceed with ZERO deferral. 

Getting a ZERO election form returned is of course best practice - but it's not required. 

Agreed; now if she REALLY wants the zero elections, she can tell them that if the form is not returned, the company will consider that they have voluntarily terminated their employment! That should wake them up!!!!! ?

 

[QDROphile]

While I hate to suggest an increase to administrative burden and to create an additional opportunity for administrative error, after an election is first implemented, or would have been implemented if submitted by deadline, a confirming notice can be sent after the first affected paycheck (so the employee can cross check and so can the payroll administrator for that matter):  “Your deferral election of ___ has been implemented ... .”  Or apply it only to the zeros, including the failures to elect.  I am not suggesting this is required.

[AlbanyConsultant]

The concern is that an audit could come in and notice that there are several hundred employees for whom no completed deferral forms exist in the company records.  Therefore, how does she prove that she offered the plan to all the participants if they don't return the forms?  Of course it's not required to get one back, but we've all had pesky auditors who make life difficult when they don't see a complete set.

[Bri]

If the enrollment form is a PDF, you'd at least have an email trail from the HR lady's account showing it sent.  Is the workforce a computer-using group?  Obviously in a factory or warehouse that might not be so applicable.  (Not only that, you could have an email subsequently saying, due to not receiving a form, we're instituting you at 0%.)  Can the forms be included in the paycheck envelopes?

[Larry Starr]

4 minutes ago, Bri said:

If the enrollment form is a PDF, you'd at least have an email trail from the HR lady's account showing it sent.  Is the workforce a computer-using group?  Obviously in a factory or warehouse that might not be so applicable.  (Not only that, you could have an email subsequently saying, due to not receiving a form, we're instituting you at 0%.)  Can the forms be included in the paycheck envelopes?

I think your last sentence is a great idea for those who have this as a concern; at least they can document that every so often they send the form with the paycheck.  

[Below Ground]

I don't believe you can withhold a person's paycheck or threaten termination because that person failed to return a completed election.  (We do recommend that clients try to get back zero elections.)  I am pretty sure the former would violate employment law.  While I am not an attorney, a person is entitled to payment for working as agreed, for the compensation paid.  Unless you have something in an employment contract, I just don't see how you could do this without violating something in labor laws.  For the latter, the same logic would also apply, plus we all know that a participant's participation under a plan is not a guarantee of employment, I suggest that a person's participation under a plan (including completion of elections) shouldn't have an impact on the person's on-going employed.  Again, I am not a lawyer, but common sense suggests that taking those position would also have some negative repercussions, including employee moral.  What I do think should be done is documenting with a follow-up to the person.  Or, for a large group, have an area manager sign off on a statement saying election forms were provided to the person.  The old adage of you can lead a horse to water but can't make it drink seems appropriate.  Protection lies in some form of documentation showing the person was offered the election sounds like the answer to me.  Having a third party (manager?) witness should be sufficient.  Another suggestion, would dovetail into the practice of include the SPD in any "new employee paperwork".  We use a small form that has the person acknowledge receipt of the SPD.  Perhaps add to this "SPD Receipt" a statement that election forms must be completed and returned, getting something signed by the employee where they agree to returning elections.  Then, when the person refuses to return an election, this signed statement could be produced, demonstrating that a zero election does need to be returned by that person.  Clearly not a perfect solution, but at minimum it does demonstrate that the employer does believe elections by employees are important.

[Larry Starr]

20 hours ago, Below Ground said:

I don't believe you can withhold a person's paycheck or threaten termination because that person failed to return a completed election.  (We do recommend that clients try to get back zero elections.)  I am pretty sure the former would violate employment law.  While I am not an attorney, a person is entitled to payment for working as agreed, for the compensation paid.  Unless you have something in an employment contract, I just don't see how you could do this without violating something in labor laws.  For the latter, the same logic would also apply, plus we all know that a participant's participation under a plan is not a guarantee of employment, I suggest that a person's participation under a plan (including completion of elections) shouldn't have an impact on the person's on-going employed.  Again, I am not a lawyer, but common sense suggests that taking those position would also have some negative repercussions, including employee moral.  What I do think should be done is documenting with a follow-up to the person.  Or, for a large group, have an area manager sign off on a statement saying election forms were provided to the person.  The old adage of you can lead a horse to water but can't make it drink seems appropriate.  Protection lies in some form of documentation showing the person was offered the election sounds like the answer to me.  Having a third party (manager?) witness should be sufficient.  Another suggestion, would dovetail into the practice of include the SPD in any "new employee paperwork".  We use a small form that has the person acknowledge receipt of the SPD.  Perhaps add to this "SPD Receipt" a statement that election forms must be completed and returned, getting something signed by the employee where they agree to returning elections.  Then, when the person refuses to return an election, this signed statement could be produced, demonstrating that a zero election does need to be returned by that person.  Clearly not a perfect solution, but at minimum it does demonstrate that the employer does believe elections by employees are important.

I was joking about terminating the employee (I expect most people "got" that; see smiley face at the end of that post!).  I never said to withhold their paycheck (that is absolutely NOT legal), but, while I doubt anyone will (or should) hold out termination of employment as a penalty, it actually is possible to make the return of the form a condition of employment in most states.  Just FYI.

[Below Ground]

Thanks for the clarification Larry.  BTW, the smile face shows up as a "?" in a box.

[Larry Starr]

19 minutes ago, Below Ground said:

Thanks for the clarification Larry.  BTW, the smile face shows up as a "?" in a box.

Interesting.  In my feed it still shows as a smiley face;  I'm using Chrome. What do you use for your browser? That might be the difference.

[Below Ground]

Chrome also.  Let's just chalk it up to mysteries of the internet.