One of a Kind Situation and Need Advice!

Hello all,

As my username clearly states, I am a sanctioned man through penalties on interest-bearing accounts. I have never had an employer hear my situation and then reject my waiver of rights to participate in a 401k, thus marking me ineligible, and life continues...until now. My current employer is fighting me every step of the way. This new company has auto-enrollment AND yearly escalations. Considering I am fined $15k for every individual contribution and $1,500 on every $0.01 of interest earned, for life, I will never be participating. The auto-escalation then sits like an anvil over my head. The DOL has written my employer urging them to accept my waiver and have the administrator draw up a one-off that applies to me, make me ineligible, and that's that. Again, they refuse, citing, "We CAN force you to do this. Therefore, we ARE forcing you to do this." They also COULD accept my waiver, but I digress. What recourse do I have here? Does anyone have any advice?

 Many thanks!

If it is your 401(k) including auto enroll and escalation, you should absolutely be able to opt out of those some how. Usually by overriding the auto amount with an affirmative 0% election.

If it is a pure employer contribution they may not accept your waiver as is it is possible that could cause the Plan to fail discrimination with no recourse for them to be able to fix it and that would affect other employees.

Have you spoken to an employment attorney who might be able to help you?That might be your best course of action.

Courts ruled that "opt-outs" are no longer required when a plan is auto-enroll, as the participant can just set their contribution to $0, which they deemed "equal to opting out." So, the plan doesn't recognize opt-outs in any way. That would be fine if it were as simple as setting my contribution to $0 and never thinking about it again. The auto-escalation works as such; any employee not contributing 6% will be bumped up to 6% every July. So once a year, I have 30 days to ensure my $0 stays at $0. My argument, and the DOL's argument, is that since I [quite literally] can never participate, and even one accidental contribution would cost me not only $15k, I'd have to immediately resign to avoid the interest penalties, why not allow me to waive my right and avoid the stress outright?

I could have a medical emergency within that month, need to take FMLA, etc. The 401k is managed by Empower, whose CEO lobbied Congress to do away with opt-outs and is behind all the new legislation to force contributions. Very soon, it may be that contributing nothing is no longer allowed. Then what? I have to resign and take another job based on whether or not they let me skip out on their plan altogether. All these arguments fall on uninterested ears as they keep citing "the plan does not allow opt-outs," which is fine; I'm not trying to "opt-out." I'm aware that the financial industry purchased the votes and courts to ensure plans no longer have to accept opt-outs. The plan says, "the plan admin can interpret the rules with complete authority," so why not accept the waiver of my right to participate and interpret that to mean that I am an ineligible employee? It's moving a checkmark in the HR software from eligible to ineligible and filing away the signed waiver of my right to participate. Yet, they refuse to budge despite their ability to "interpret the rules with complete authority."

Does anyone have any attorneys they'd recommend? My situation's very rare, one-off nature doesn't necessarily have them lining up to help...

It sounds as if you are in a stalemate with the employer where you expect the employer to make changes to accommodate you and the employer expects you to mange your situation within the constraints of the plan provisions.  Please note that none of the discussion below is intended to be judgemental in any way either of you or the employer.

Consider what will happen if the employer refuses to accommodate your situation.  You will have to meticulously manage your affirmative elective deferral percentage of zero and if you don't, then you will face some punitive penalties attributable to your status as a sanctioned man.  Your other alternative would be to find work with another employer that will accommodate your situation, and you have acknowledged that you have worked for other employers that have been accommodating.

Your asked your employer to accept a waiver of your right to participate in the plan.  This type of waiver is an optional plan provision available to employees who have not yet become eligible under the terms of the plan and would have to be available to all employees before they became available.  Many employers do not want this provision in their plan, and without this plan language, you have no right to demand a waiver.

You could achieve your goal if the employer was willing to accept a standing election from you of zero deferrals.  The employer apparently wants employees to participate in the plan and does not want to set a precedent that other employees could point to as a reason to let them make standing elections.

You have involved the DOL which is appropriate with respect to addressing eligibility issues, but you have not said anything about approaching the IRS which is heavily involved not only in the regulation of retirement plans but also with managing sanctions.  Frankly, it is doubtful either agency will do anything more than be sympathetic and encourage the employer to be accommodating.  Absent legislative or regulatory guidance allowing an employee to waive their right to participate if the plan does not allow this waiver, it also is doubtful that hiring an attorney will succeed in forcing the plan to accommodate you.

The above being said, and assuming the employer wishes not to risk your leaving them, then it is worth exploring potentially another possibly palatable step to accomplish your goal of not being required to manage your zero deferral election with extreme care.

You may wish to ask the employer to have a conversation about the following suggestion.  Ask the employer if they would consider adding a plan provision that excluded from participation the classification of employees who are subject to the sanctions.  This would not require them to name you explicitly in the plan document and other employees likely would not understand the exclusion (other than it does not apply to them).

Good luck!

Perhaps you could request an attorney recommendation from the body that has sanctioned you.