Issues with Auto-Enrollment: Missing Beneficiary Forms.
No doubt that auto-enrollment is great for employers that want to increase participation in their 401k or 403b plan as well as getting more employees engaged, but it can raise issues.
Hear from the benefits manager at a 3,000 employee company attending a TPSU program at SMU about concerns with participants that were automatically enrolled, did not name a beneficiary and passed away without an estate.
More importantly, learn about the solutions offered which can mitigate or even solve the problem of missing beneficiary forms common to many plan sponsors.
Full Transcripts Below:
Fred Barstein: This is Fred Barstein with 401kTV and at SMU in Dallas, we just completed TPSU program and I’m here with Penny. Welcome, Penny.
Penny Sibley: Thank you.
Fred Barstein: Is it okay if we ask you a few questions?
Penny Sibley: Absolutely.
Fred Barstein: Very good. Thank you. So before we do, why don’t you introduce yourself and number of employees and your function.
Penny Sibley: I am Penny, our employees we have around 3000, and I forgot the next question.
Fred Barstein: What do you do?
Penny Sibley: What do I do, I’m the benefits person. I do medical, dental, vision, and the 401k and all pieces associated with it.
Fred Barstein: Okay. So one of the issues that you brought up which I’m sure is very common, you know we do automatic enrollment, people like it, but sometimes with automatic enrollment it causes problems, so what is the problem that you’ve come across.
Penny Sibley: We have run into the issue of employees that are automatically enrolled do not designate a beneficiary.
Fred Barstein: Right.
Penny Sibley: And we have struggled with that and we actually have had a couple of employees that have passed away without beneficiaries and are not married. And there are no regulations out there that help us distribute that money unless it’s an estate which is great, but when the value of the account is less than what it would cost to set up an estate, people don’t do anything so you’re sitting there with money, so we ran into that kind of issue associated with that and what do we do with fixing it.
Fred Barstein: So we heard a couple of solutions today. Did that make sense? What were those solutions?
Penny Sibley: The solutions are, one of them we are going to be implementing, and that is when employees enroll in their health and welfare benefits, they have the life insurance and you are required to do a beneficiary for your life insurance. And in that process, we’re going to add that you have to do a 401k beneficiary at the same time.
Fred Barstein: The same way as a life insurance.
Penny Sibley: Yes.
Fred Barstein: Right, you have to do that. That’s a good solution, but also maybe encourage it, awareness, education.
Penny Sibley: We will also have to do a campaign for those employees that are already enrolled, we’re still struggling with getting all of those done, but if we do a positive benefit enrollment then we’ll be able to take care of everyone.
Fred Barstein: Okay. So one or two things that you picked up that you may want to take back and implement when you go?
Penny Sibley: Well, this is one of them.
Fred Barstein: Right.
Penny Sibley: Because we are struggling with it. The other one that I thought was very interesting was the auto-enroll at 3%, that it really doesn’t matter. Well, it does matter, but to whether it’s 3% or 6% and I’m going to try to encourage management to increase the auto-enroll.
Fred Barstein: Huge benefit to everyone.
Penny Sibley: Absolutely. Expense to the company but it’s an important item to do.
Fred Barstein: Very good. Well thanks for your time today, Penny, and thank you for watching 401kTV. Stay tuned.
