Auto enrollment cessation

Is anyone familiar with any guidance dictating the proper handling of automatically enrolled participants who never made a subsequent affirmative election when the plan is amended to cease auto enrollment (assuming the plan document is silent)? My inclination is to leave their current deferral rate as is, but I’m also aware of a school of thought that says their deferrals must stop unless/until an affirmative election is made. 

It should be feasible to control this with the plan sponsor’s careful writing of the plan’s governing documents and the plan administrator’s careful writing of communications to participants.

If the plan sponsor prefers that implied-assent elections in effect just before an amendment’s effectiveness remain in effect (despite the amendment providing no more implied-assent elections), it should be feasible for the documents and communications to specify that.

An implied-assent regime presumes, if there is no opt-out, the communicated-to person’s assent to the provisions communicated to her.

The rule for a cash-or-deferred election states: “For purposes of determining whether an election is a cash or deferred election, it is irrelevant whether the default that applies in the absence of an affirmative election is [that] the employee receives an amount in cash or some other taxable benefit[] or [that] the employer contributes an amount to a trust or provides an accrual or other benefit under a plan deferring the receipt of compensation[].” 26 C.F.R. § 1.401(k)-1(a)(3)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(k)-1#p-1.401(k)-1(a)(3)(ii).

If the plan’s governing document is unclear about which election—implied-assent deferral or no-longer-implied-assent, and so “cash”—applies, the administrator might use whatever discretionary authority the plan’s governing document grants to the administrator for it to interpret (loyally and prudently) which election the plan provides.

This is not accounting, tax, or legal advice to anyone.

Amend the plan to clear this up (if necessary or appropriate) and make sure participants have timely notice of the change and how it will be put into effect.

Thanks both.