What is auto re-enroll?
Auto-enroll is a feature found in many retirement plans today. Essentially, this feature in the plan document requires employers who have adopted this feature to automatically withhold 401k pre-tax contributions from employees' paychecks. However, this feature allows an opt-out which allows the employee to cancel the deferral and receive those monies as taxable income. A new bill being proposed in the senate, and led by Senator Tim Kaine (D-VA) is attempting to recapture those potential participants by requiring plan sponsors to reach back out to those employees who have opted out after a period of time has passed.
The proposed bill would seek to have employers prompt those who opt out of a retirement savings plan to reconsider their choice every three years. As employees get older and become more established in their careers, their ability to save for retirement should generally improve. While saving for retirement is a facet of everyone's personal financial responsibilities, this bill seeks to create responsibility for the employer to prompt action for those who have opted out.
“Employer-sponsored retirement plans are an important part of retirement for millions of Americans. However, far too many workers are missing out on money that can go a long way toward financial stability in their retirement years by failing to participate in their employer matching contribution,” Senator Kaine said. “This common-sense legislation will build on the success of auto-enrollment and help put families in Virginia and across the nation on a safer financial footing for the future.”