Automatic Enrollment

Client has approx. 5000 employees.   There is very high turnover within the first 90 days of employment (about 40%).   The client permits date of hire enrollment so 401(k) sign up happens during completion of new hire paperwork.

QUESTION: Can automatic enrollment be added to the plan that such that participants become automatically enrolled first of the month after their 90th day of employment?   Therefore, anyone who's made it through the first 90 days and hasn't completed a 401(k) election would then be automatically enrolled.

Thanks!

Interesting question. I don't know the answer directly but seems like it should not be a problem beyond how to put in the document. (Devil being in the details as it were)

Worst case I would think you could have auto enrollment at 0% with an escalation to X% at 90 days followed by no further escalation. Though that seems overly complicated for what should be a simple provision.

Any reason not to change the eligibility to 90 days and add the auto enroll?

The regulations permit periodic re-enrollment.  So, you can treat the 90th day as the trigger for a re-enrollment, deploying automatic enrollment.  For example, since 2007, my plan has annually re-enrolled individuals who failed to enroll, or opted out of enrollment.  We follow all of the required disclosures.  The default percentage of pay was initially 3%, then 4%, then 5% and ultimately 6%.  So, someone who opted out at the time of hire, was automatically enrolled at 3% in 2007, and if they opted out, was automatically enrolled at 3% in 2008, and if they opted out, was automatically enrolled at 4% in 2009, and if they opted out, was automatically enrolled at 5% in 2010, and if they opted out, was automatically enrolled at 6% in 2011.  When people complained, "how many times do I have to tell you I do not want to participate in this plan", the answer was always the same "just once a year".  This enrollment process is comparable to an "affirmative enrollment" in welfare benefit plans every year.