Automatic enrollment is a 401(k) plan feature intended to encourage all eligible employees to take advantage of their employer-sponsored retirement benefits. All Guideline plans include a version of an automatic contribution arrangement.
Find out why we believe in the power of auto-enrollment for employees and employers alike.
How automatic enrollment works
Generally, within 30 days before the plan start date or when an employee becomes eligible, they will receive an email notification with their auto-enrollment date. If employees do not either self-enroll or opt-out by the prescribed deadline, they will be automatically enrolled in their Guideline 401(k) plan.
Participants who are automatically enrolled will begin contributing at the default deferral rate and the assets will be invested into one of Guideline’s professionally managed portfolios based on their age and estimated timeline until retirement. Employees can adjust their contribution amounts or opt out of the 401(k) plan at any time by logging into their Guideline dashboard.
When the default deferral rate will apply
A default deferral rate is a percentage of the employee’s compensation that is withheld from each payroll that will then be contributed to their 401(k) account. The default rate applies only to eligible employees who do not either elect a contribution rate on their own or opt out of participating in the plan prior to the deadline in their onboarding invitation.
The plan’s default contribution rate is defined in the plan’s document and you can find it in the Summary Plan Description.
Additionally, qualified automatic contribution arrangements (QACA) plans may have automatic escalation features that increase an employee’s default deferral rate by a set amount (1% for Guideline plans) each year until a certain threshold has been met. This only applies to those who have been automatically deferring into the plan. Participants who make their own deferral elections are not subject to the automatic escalation provisions.
Employees can change their contribution rate at any time by logging into their Guideline account, and clicking the “Change contribution” button on the main dashboard. Employees who do not wish to contribute can simply change the contribution amount to 0%.
Can auto-deferrals be refunded?
If an employee is automatically enrolled, but did not wish to contribute to the plan, they may be eligible to receive a refund. To be eligible, the plan must include an eligible automatic contribution arrangement (EACA) or qualified automatic contribution arrangement (QACA) provision and a refund request must be made within 90 days of the first automatic contribution from payroll. This deadline is set by the IRS and no exceptions can be made.
Please refer to your plan document to see if your plan contains an EACA or QACA provision.