Virginia Makes the Leap to Auto Enrollment for State Employees

April 9, 2007 ( - Virginia will start automatically enrolling its state employees into defined contribution plans for all workers hired after January 1, 2008.

Brian Goodman, Legal Affairs and Compliance Coordinator for the Virginia Retirement System (VRS), said the passage of the Pension Protection Act (PPA) cleared the plan sponsor from liability by automatically enrolling employees into DC plans (See Everything You Wanted to Know About the PPA ). That made the state’s decision in March to adopt the measure a relatively easy one that saw little or no dispute in the General Assembly.

Virginia state employees will have $20 each pay period deferred from their paychecks, with a state contribution of $10. However, no decision has been reached on default investment options (See DoL Releases Default Investment Option Safe Harbor ), according to Jeanne Chenault, the Director of Public Relations for the VRS.

Participants have a 90-day period to opt out of the plan before compensation is deferred from their paychecks and another 90 days to opt out after they receive notice that deferment has started, Chenault said.

New and rehired state employees will receive a letter from Great-West Retirement Services, the service provider, advising them of the benefits of the program and giving directions for opting out of the plan. Chenault added that the measure only affects state workers and not employees of Virginia local government agencies.

The measure – HB 1830 – was sponsored by Delegate Lacey E. Putney of the Virginia House of Delegates, with the backing of the Virginia Government Employee Association and was enacted by the General Assembly on March 15.

It is so far unclear whether other states have already embarked on the same path as Virginia, said Tracy Tucker, the director of the Kentucky-based National Association of Government Defined Contribution Administrators, Inc. (NAGDCA ) . However, Tucker said similar legislation has been discussed in Oregon, West Virginia, and Texas.

The developments in Virginia come about as the trend favoring auto plan features, including auto enrollment and auto deferral increases, continues sweeping across the retirement services landscape (See Auto Plan Features Still on the March in 2007 ).