What is Auto to the 5th? In short, it’s a way that you can use technology to improve the quality of your retirement plan.
Not only does it increase your employees’ participation in the plan, but it also protects you from liability.
The first feature of Auto the 5th is automatic enrollment. Auto-enroll is greatly helpful, especially if you are an HR director who’s constantly busy chasing employees trying to get them to participate in the plan.
In the past, the process of sending out forms to employees and hoping they not only fill them out but also return them to you was quite the ordeal.
Thankfully, this hassle is eliminated with auto-enroll. What happens instead is that employees will receive a notification explaining that they are automatically participating in the company’s 401(k) plan but have the option to opt out.
So, how much do you make them auto-enroll for? Let’s say you have a plan that matches 50% of the first 6% of contribution. In this case, we would recommend that you do an auto enroll at 6%—the full extent of the match.
This way, all of the employees are in the plan unless they choose to opt out.
If you have trouble with this though, the law does allow you to go down as low as 3%. So when companies ask us what they should auto-enroll we usually say 10%, since that is the number needed to successfully get employees to retirement.
However, the decision should ultimately be based on the rates that will work best for your employees. Every situation is different.
The key is the 30-day notice. This will protect you under the law so that your employees know they’re able to opt out.
If you have questions or would like more information feel free to give me a call or send me an email. I look forward to hearing from you soon.