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Auto-Enrollment Delayed Implementation Gains Attention

Auto-Enrollment Delayed Implementation Gains Attention  

Auto-enrollment delayed could help more employees gain access to a 401k plan.  There are logical good reasons that some employers still have a full year waiting period before employees have access to a company retirement plan.  When a company has a high employee turnover rate during the first 90 days after the hire date an immediate entry into the qualified plan creates a substantial amount of non-productive work.  At the conclusion of a Plan Sponsor University (TPSU) Fiduciary Education Program held at the Arizona Christian University, in the Greater Phoenix area of Arizona, TPSU Founder and CEO, Fred Barstein spoke with Krista, Senior Compensation and Benefits Analyst and TPSU Program attendee.  Krista understands 67% of her workforce is earning minimum wage and there is a high turnover rate during the 60 days immediately following the hire date.  Her firm employees approximately 3,500 people.  Immediately auto-enrolling every employee, knowing that a large percentage will be exiting the company during the first 60 days can create double the work of “enrolling and closing” accounts.  Krista liked an idea discussed during the TPSU Program where some employers have different waiting period dates for Retirement Plan Entry and Auto-Enrollment. View the Video to learn more!

Full Transcript Here

Fred Barstein:
This is Fred Barstein with 401K TV. Just completed a TPSU program in Phoenix, Arizona and I’m here with Krista. Welcome, Krista.

Krista:
Thank you.

Fred Barstein:
She is our first interview because she has to pick up her son today. We’ll see if we can do this in one take. Krista, before we start, okay if we ask you a few questions?

Krista:
Yes.

Fred Barstein:
Tell us a little bit about yourself and your organization.

Krista:
My name is Krista and I am a compensation and benefits analyst for a nonprofit organization with about 3,500 employees.

Fred Barstein:
3,500 employees. So, one of the things you talked about which I think is a concern is a lot of people like automatic enrollment. What’s your concern about that?

Krista:
Our concern with our company is I would say about two-thirds of our employees are at minimum wage-

Fred Barstein:
Right.

Krista:
In a retail environment.

Fred Barstein:
Yes.

Krista:
And so, we experience high turnover. My fear with auto-enrollment is we would get them to enroll and two weeks later, four weeks later, they leave the company and it adds more administrative burden by doing that.

Fred Barstein:
Low account balance.

Krista:
In very low account balance.

Fred Barstein:
I think we heard a good solution. What did we hear today?

Krista:
One good solution is changing our waiting period. Currently, we allow every employee, full time and part time, to start contributing from date of hire. If we waited until 60 days or 90 days, that eliminates some of that quick turnover that happens right at the beginning giving us a less administrative burden.

Fred Barstein:
There was another solution too, right? You could make- They could enroll early, but you could wait on the automatic.

Krista:
That’s right. We could allow them to enroll at 60 days and wait for that automatic enrollment another 60 days or another 90 days or whatever worked best for us.

Fred Barstein:
Right. Would that, you think, help you?

Krista:
I think it’s a great idea. Absolutely.

Fred Barstein:
Okay. Are you going to do it?

Krista:
I’m going to talk to those at B about doing it.

Fred Barstein:
3,500, so.

Krista:
Yeah.

Fred Barstein:
Final question. A couple of things you picked up that you may want to take back other than this?

Krista:
That was the biggest one. I think for me, great advice from the team that we sat with and talked to.

Fred Barstein:
Good.

Krista:
A great reminder was that summary plan description, the SPD, in our case really need to be given to every employee on the date of hire because as of right now, they’re eligible on date of hire. Just a reminder to do that. The importance of getting enrollment forms back even if they’re declining at this time.

Fred Barstein:
Yes.

Krista:
Doesn’t mean they’re declining forever, but at that moment, it’s very important to get that form back.

Fred Barstein:
Great. Well, we’ll let you go pick up your son.

Krista:
Thank you. All right.

Fred Barstein:
To do that and thank you for watching 401K TV.

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