Open Enrollment

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

Open Enrollment Time Again – As a Plan Administrator what questions should you be asking yourself?

• First and foremost you should ensure that the Plan Document and your Summary Plan Description (SPD) is up-to-date and supports the plan administrative practices that the Plan Administration has put into place.  For example, if your Plan Document states that you will enroll persons only on January 1, 20xx and July 1, 20xx, but your practice is to enroll at the beginning of each month, then you will want to have your Plan document and SPD updated to support that practice, as well as ensure that you offered that practice to all persons.

• Second – you should have procedures in place to verify that each employee who becomes newly eligible is offered participation at the open enrollment.  This can be accomplished by maintaining a spreadsheet or other systematic schedule logging in each new hires’ date of hire, and hours met (if eligibility is based on hours).  Then, if the employee met the plans eligibility requirements, than a notice should be sent that individual in a timely manner, inviting them to the open enrollment meeting. Notification can be email, written notice, or voicemail, however, a record of invitation should be maintained to support your fiduciary responsibility that you invited all eligible persons.

• In addition to newly eligible employees, consider inviting those who have declined participation in the past, to come out and join the open enrollment session.

• Consider having a member of your third party administration (TPA) come out and visit your company for the open enrollment sessions. This is a great time for you to learn about the TPA’s services, as well as increases the likelihood that an eligible participant will enroll in the Plan. The TPA may perform this task at no charge or at a discounted rate, considering that increased participation usually means more invested money in the Plan, which means potentially greater investment management fees/commissions.

• If a participant does not want to enroll, require them to sign a form stating that they want to opt-out of the Plan for the current enrollment period.

• Does the Plan allow for auto-enrollment?  If yes, then you should verify that each new hire sign a form (at new hire orientation), acknowledging the company’s Plan policy in regards to auto-enrollment.  Additionally, you should ensure that you are either enrolling, or not enrolling the employees as they become eligible to participate in the Plan, in accordance with the auto-enrollment rules of the Plan.

• Does my plan have a qualified default investment alternative (QDIA), and has the QDIA been communicated to eligible and newly participating employees? This is particularly important when it comes to plans with auto enrollment features.

• Does my Plan have a discretionary Employer Match, a discretionary Profit Sharing, or stated Employer Match? Am I communicating this information to each employee? Am I communicating any changes to the Match and/or Profit sharing to employees in a timely manner?

The above recommendations/questions are all part of benefit plan best practices as well as ensuring your meeting your fiduciary responsibilities, but are not meant to be all inclusive.  For questions on your specific plan, it is best to contact your third party administrator to gain a better understanding of the processes you should have in place, or the processes they have in place, in regards to enrollment.  For questions on how the above could affect your Plan from an audit perspective, feel free to contact us by responding to this blog, or giving us a phone call.

Victor Fuentes