General Inquiries

401(k)-auto enrollment

  • 1.  401(k)-auto enrollment

    Posted 23 days ago

    We are considering amending our 401(k) plan to add auto-enrollment.  Would like some feedback from those who have done this, pro and con experiences.

     

    Thanks,

     

    Robert McManus

    Chief Financial Officer

    Direct: 404.965.9349 

    Main: 404.361.5154 | Fax: 404.965.9355

    PO Box 45717 | Atlanta, GA 30320

    www.msrs.com

                

     

     

     

     



  • 2.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    Hi Robert-  We made the change to auto enrollment on 1/1/19.  I was hesitant, but it's gone very well so far, no complaints (surprising).  I think I've only seen one employee who was auto enrolled at the default 6% who went in and lowered it.  We match up to 3% for up to a 6% deferral.  We are a general with about 285 employees.

    -Jen

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    Jennifer Funk
    Vice President of Finance
    Brinkmann Constructors
    Chesterfield MO
    (636) 537-9700
    ------------------------------



  • 3.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    We've had auto-enroll for years.  Like Jennifer, I was also very hesitant but the folks at Principal had very convincing stats showing both enrollment and deferral percentages being markedly higher for plans with auto-enroll.  We have a couple guys who opt out, we have a few more who complain, but as we all know, human nature is to do nothing.  It's easier for them to leave it alone than take the initiative to sign a waiver form or go online and change the deduction.  I highly recommend auto-enroll!

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    Stacy Shiflet
    CFO
    Blauch Brothers Inc.
    Harrisonburg VA
    (540) 434-2589
    ------------------------------



  • 4.  RE: 401(k)-auto enrollment

    Posted 21 days ago

    Thanks for all the feedback, really do appreciate it!

     

     

    Robert McManus

    Chief Financial Officer

    Direct: 404.965.9349 

    Main: 404.361.5154 | Fax: 404.965.9355

    PO Box 45717 | Atlanta, GA 30320

    www.msrs.com

                

     

     

     

     






  • 5.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    Hi Robert -
    The decision to modify the plan document will have a significant impact, both financially for your company and for your teammates, so you have to decide what outcomes are worth achieving. Our company modified our plan document when we switched providers, increased our employer match from 4.00% to 5.00%, added a Roth option, and chose to implement an auto-enrollment feature where each teammate had to formally opt out if they did not want to be enrolled at a 5.00% deferral which allowed them to take advantage of our company 5.00% match.

    Our decision was driven by our focus on company culture, and an unsatisfactory outcome of only 56% participation with our prior 401(k) plan. With the changes we made and in particular the auto-enrollment feature, participation jumped to 91% and an average deferral rate of 7.7% with only 19 teammates opting out.  We feel great about the achieved outcome and feel like we're doing our part to ensure our teammates are taking the necessary steps to prepare for their retirements.

    ------------------------------
    Jason Switz, CPA, CCIFP
    Chief Financial Officer
    Chasse Building Team
    Tempe, Arizona
    (602) 616-4831
    ------------------------------



  • 6.  RE: 401(k)-auto enrollment

    Posted 22 days ago

    The best decision we have made to increase participation.

     

    I was skeptical but we had approximately a 30% increase in participation.

     

    The opt out rate is not even measurable.

     

     

     

    William (Bill) Zobel, CPA, CCIFP

    Chief Financial Officer

    Banks Construction Company

    4902 Banco Road | North Charleston, SC 29418

    Direct: (843) 377-1000 | Mobile: (843) 371-0703

    www.banksconstruction.com

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    Paving the Way Since 1948

     

    www.banksconstruction.com

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  • 7.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    Robert, we too just implemented this 1/1/2019, but I haven't heard anything negative yet.​

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    Billy Friesen CPA
    CFO
    Commonwealth Electric Co of the Midwest
    Lincoln NE
    ------------------------------



  • 8.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    We changed our plan effective January 1, 2019 as well to a 3% auto-enroll deferral with auto escalators of 1% each of the next two years to get to an overall 5% deferral in 2021 to ease employees in. We are a union shop so there are only about 40 eligible employees and there were no complaints and only a few opt outs. We've actually had some employees increase their deferrals since being auto enrolled which I attribute to the educational sessions we've held. Studies have shown that 6-8% deferrals are necessary (age dependent) to have adequate savings for retirement so having educational sessions frequently helps employees understand the importance and alleviates apprehension of what to invest in providing you have hands on advisers. As a former auditor, I'd also recommend that you keep minutes of meetings with employees as well as plan advisers to evaluate investment options, etc. to document that the company and fiduciaries are carrying out their fiduciary duties.

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    Adam Stanard CPA
    Chief Financial Officer
    RW Dake Construction
    East Rochester NY
    (585) 381-2500
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  • 9.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    Robert,

    Many of our clients have switched to auto-enrollment in the last few years and some have also incorporated an auto escalate feature annually. This has boosted participation significantly in these plans.

    The only negative we have seen is regarding the controls on the auto-enroll/escalate features. We have seen TPA's miss the auto enroll/escalate for employees for various reasons which results in the Company having to make corrective payments to the employees affected. Most 401(k) plan audits don't occur until summer of the following year so the corrections can add up by the time the plan is audited and your CPA informs you of the issue. In these cases all of the TPA's we have worked with have deferred the issue and said that it is the plan sponsors responsibility to review even though the error was on them.

    Thanks,

    Andrew

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    Andrew Goodman CCIFP, CPA
    CPA
    Katz Sapper & Miller, LLP
    Indianapolis IN
    (317) 452-1232
    ------------------------------



  • 10.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    ​We added auto enrollment several years ago.  No complaints from anyone and it helped increase our participation.  One situation to watch out for is a temporary person who will make limited contributions while employed.  When they leave, there is a fee for taking a distribution or rolling over their balance.  The fee could possibly be more than their balance.  In this case, it does not make sense for them to contribute.  When I see this situation, I discuss it with the new employee so they can make an informed decision.

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    David Sietsema
    CFO
    The Porter Company/Mechanical Contractors
    Manchaca TX
    (512) 282-9691
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  • 11.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    We went to auto-enrollment about 2 years ago.  All pro's, no con's for us.

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    Lawrence Horning
    Controller
    Pieper Electric Inc.
    New Berlin WI
    (262) 879-8218
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  • 12.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    Our plan has auto enroll also, with yearly escalators if the employee does nothing. Our participation is nearly 100%, and its really helped with the non discrimination testing for HCE.

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    Juli Riles CCIFP, CMA, SPHR
    Controller
    Unger Construction Co
    Sacramento CA
    (916) 698-5298
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  • 13.  RE: 401(k)-auto enrollment

    Posted 22 days ago
    We set up auto enrollment a few years ago.  It has gone great.  Might have had 1 person "disenroll" in that whole time.  Also really helped our highly compensated employee calculations.  The default allocation is to the closest age appropriate fund offered by the 401k provider.

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    James Burnett
    Chief Financial Officer
    W.M. Jordan Co., Inc.
    Newport News VA
    (757) 596-6341
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  • 14.  RE: 401(k)-auto enrollment

    Posted 22 days ago

    Robert –

     

    I audit benefit plans, and have seen this feature activated by many of my clients. The big pro naturally is significantly increased 401k participation, and my clients have been happily surprised by how few folks have chosen to opt out after the fact or lower their percentage. The other benefit on the Company side I have seen is enrollment can be handled during new hire orientation, and HR managers, controllers and CFO's don't have to go back a second time to employees to get them to sign up once their eligible. All of the paperwork is handled once.

     

    I haven't seen any real cons thus far. Hope this helps.

     

    Thank you,

     

    Corey

     

    Corey McSweeney, CPA
    Manager
    Katz, Sapper & Miller

      

    T

    260.710.8588

    M

    260.348.8457

    260.710.8598

    E

    cmcsweeney@ksmcpa.com

    Upload files here

    202 West Berry Street, Suite 600
    Fort Wayne, IN 46802
    ksmcpa.com

     






  • 15.  RE: 401(k)-auto enrollment

    Posted 19 days ago
    Hi Robert,

    Great idea to consider automatic enrollment for your 401(k) Plan! The biggest challenge when first establishing automatic enrollment is actually auto enrolling newly eligible employees in a compliant manner. As your know the highly regulated nature of these Plans require detailed and timely processes, documentation, and disclosures.

    The added steps of actively tracking who's become eligible; distributing automatic enrollment + QDIA + participant fee disclosures notices; providing ample time to opt-out; appropriately documenting if/when someone does opt out; and then updating your payroll accordingly could be a burdensome task for the HR Department.

    I suggest getting buy-in from all your team members who are involved in payroll oversight and 401(k) operational functions, given the potential extra workload. Hopefully, you work with a 401(k) and payroll provider who can automate/integrate as much of the processes as possible.

    Best of luck!



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    Bob Driscoll AIF
    Director
    Karp Capital Management
    San Francisco CA
    (415) 345-8185
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  • 16.  RE: 401(k)-auto enrollment

    Posted 19 days ago
    ​Robert,
    We added auto-enroll and auto-increase to our plan a few years ago.  It went smoothly and increased overall participation.  However, we are under 50 employees so it was not a logistical burden.

    ------------------------------
    Helen Apostolico
    Principal/Chief Financial Officer
    Landmark Science & Engineering
    Newark DE
    (302) 444-0778
    ------------------------------



  • 17.  RE: 401(k)-auto enrollment

    Posted 19 days ago

    We rolled out 401K auto enrollment several years ago. Our participation went from approximately 64% to 94%.

    We have used VOYA and American Funds platforms to manage our plans. Both firms have handled the implementations, modification  and employee notifications to our plan over the years.

    Our plan has an auto escalation. Employees enter the plan at 3% with a 1%  increase annually. We increased  the auto escalation stop from 6% to 10% beginning in 2019.

    The employee may stop or change the percentage at any time.  We recently add  an auto re-enroll for employees  who stopped contributions for 12 months or more.

     

    Kind Regards,

    Catherine Nasello-Law

    Controller

     

     

    The Miller Group

    2649 Production Road

    Virginia Beach, VA 23454

     

    office: 757.498.0400

    direct: 757.452.4584

    fax:     757.962.2365

    email: claw@millergrpva.com

     

    www.millergrpva.com

     

     

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