401(K) Automatic Enrollment

by Jessica Sullins

Even though retirement is a major concern, employees tend to focus on the near future rather than long term. A way to increase 401(k) participation in your company is to automatically enroll your employees in your retirement plan.

The Survey Says
According to AAIM Employers’ Association’s 2017-2018 Policies and Benefits Survey of 95 St. Louis and Central Illinois businesses, 44% of employers automatically enroll their employees in their 401(k) or 403(b) plans. Furthermore, 42% of employers also have automatic escalation increases annually.

Issues to Consider
* Compliance – If your company automatically enrolls employees, you must ensure the funds are invested according to applicable rules and regulations. The Department of Labor and the Internal Revenue Service have set forth
requirements for automatic investing when plan participants have not made their own investment elections.

* New Hire Communication – It is also vital to communicate plan information to employees when they are hired. Creating and providing a written policy will ensure there are no surprises when there is a 401(k) deduction on the employee’s paycheck.

* Recordkeeping – Lastly, it is imperative to accurately keep records of any plan participation. This will provide a record of employees who are participating as well as those who elect not to participate.

Jessica Sullins, PHR (solutions.team@aaimea.org) is on the Research and Solutions Team for AAIM Employers’ Association, which helps Missouri and Illinois companies manage their people and processes.