Auto-enrollment
Provisions in the House- and Senate-passed pension bills
March 2006
Allows for auto-enrollment for ERISA plans but NOT for 457 plans. ICMA-RC continues to work with public sector and industry groups to expand the provision to include 457 plans. Because public plans are not subject to ERISA, they would not benefit from ERISA preemption contained in the pension bill and would, thus, remain subject to the State law prohibitions.
We are involved in promoting a proposal to include a non-ERISA provision that permits a state or local government to adopt an automatic enrollment arrangement unless a state law specifically restricts or prohibits automatic enrollment arrangements. The provision would in this way preserve states' rights to control their own laws in all respects, and at the same time the provision would give state and local governments the option of adopting an automatic enrollment arrangement. The proposal would also contain a corresponding provision providing fiduciary protection for the default investment chosen by the public plan sponsor for investment of the automatic contributions in the absence of an investment election by the participant. This is similar to protection provided to private employers under the pension bills. Again, this protection would not apply if a state law specifically provides otherwise.
No employer would be required to adopt an automatic enrollment arrangement, and any employee participating in such an arrangement could elect out of it at any time. Thus, there are no mandates in the proposed rules.