Many retirement plans today provide automatic enrollment for employees, meaning the plan sponsor initiates enrollment into the retirement plan on behalf of the employee. One common question plan sponsors come across is whether their enrollment kit satisfies the annual automatic enrollment notice requirement.
At first glance, it may seem that enrollment kits contain all the necessary information to satisfy your obligation to provide an annual notice of your plan’s automatic enrollment feature, however the notice must include the following information:
- The default contribution rate that will apply if the participant does not make an affirmative deferral election.
- The employee’s right to elect not to have the default rate apply, or to elect a different contribution rate.
- How default contributions will be invested absent an investment election by the participant.
- The notice must be provided before each plan year
Do you expect to send out enrollment kits to all covered employees before the beginning of each plan year? Since most plans merely provide an enrollment kit at the time an employee first becomes eligible to participate, the enrollment kit will not likely satisfy the annual notice requirement.
According to the US Department of Labor, “The participant generally must receive the initial notice at least 30 days, but not more than 90 days, before eligibility to participate in the plan or the first investment. Subject to certain conditions, you may provide the notice to an employee and enroll them in the plan on the first day of work.”
For more information on automatic enrollment notification requirements, contact us.