PSNC 2017: The Many Benefits of Re-enrollment

Experts addressing the PLANSPONSOR National Conference urged attendees not to fear aggressive re-enrollments from a fiduciary or workload perspective.

By John Manganaro | June 09, 2017
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According to an expert panel speaking at the 2017 PLANSPONSOR National Conference, in Washington, D.C., the concept of re-enrollment should be an exciting one from the perspective of plan sponsors—a strategy that adds another layer of control and direction to a defined contribution (DC) retirement plan.

Panelist Bruce Ashton, partner, Drinker Biddle & Reath LLP, suggested that from the fiduciary perspective, plan sponsors have all the authority they need to enact a re-enrollment. It is really a natural extension of plan design features such as automatic enrollment, automatic escalation and automatic diversified qualified default investment alternatives (QDIAs) that were enshrined by the Pension Protection Act of 2006. 

To this point, an audience member asked about laws in her state that seem to prohibit an employer from redirecting any portion of employees’ paychecks without their express written consent. She was concerned that re-enrollments, which employ a negative election opt-out feature, could bring her plan into legal conflict with that type of state-based standard.  

“That’s a great question, but remember, the Employee Retirement Income Security Act [ERISA] pre-empts state law,” Ashton observed. “So you do have the authority to do this, to sweep nonparticipants into your retirement plan.”

Kathleen Kelly, managing partner at Compass Financial Partners, wholeheartedly agreed and urged plan sponsors to consider the fact that auto-enrollment is widely appreciated as a powerful and important plan design feature that does a lot of good for new employees.

“Re-enrollment can do just as much good as auto-enroll and auto-escalate, say for older employees who are participating in the 401(k) but whose approach was not optimized by their being auto-enrolled,” she said. “I think about it this way: A 401(k) plan at rest tends to stay at rest. Re-enrollment is an all-important call to action, a wake-up call and an ability to bring a plan back to life. It forces the employees’ hand to make decisions in their best interest. Really, it can shine a spotlight on the under-championed 401(k) benefit.”

NEXT: Successful re-enrollments require vision