Benefits October 14, 2004

CRS: Automatic Enrollment on the Rise

October 14, 2004 (PLANSPONSOR.com) - Automatic enrollment in 401(k) retirement accounts increases worker participation, with the practice being adopted by 8% of plans as of 2003.
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In its report entitled ‘Automatic Enrollment in Section 401(k) Plans’, the Congressional Research Service (CRS) stated that the Internal Revenue Service (IRS) has made it clear that automatic enrollment is legal if employees are notified beforehand and are permitted to decline. CRS says that this process tends to increase participation in 401(k)s and other salary reduction retirement savings plan (See Plan Design Impacts Participation Rate ).

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There is a gap between participation rates between large and small employers. Of plans with less than 50 participants, only 1% had automatic enrollment, compared to a 24% level for plans with over 5,000 participants, as of 2003. Consulting firm Hewitt Associates has shown that the number of mainly large plans using automatic enrollment is up from 7% in 1999 to 14% now. However, this number has been stagnant since 2001.

The CRS report also detailed policy issues that must be looked at in order to improve contribution rates into such plans. Once such policy change came about in May when the IRS stated that the automatic contribution rate could be higher than the 3% previously thought to be a satisfactory level. Legislation was also discussed as a means to increase participation rates, with one example being the clarification of rules allowing automatic enrollment with regards to state laws that do not allow such action.

Benefits October 13, 2004

Empire State Couple Wins Equal State Benefits

October 13, 2004 (PLANSPONSOR.com) - In yet another example of the red-hot political feelings surrounding same-sex benefits, a same-sex couple married in Canada have qualified for pension benefits equal to that available to heterosexual married couples.
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New York state Comptroller Alan Hevesi made the determination regarding two New York state workers, the Associated Press reported.

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Hevesi based his determination on a 1980 ruling by the state’s highest court, coupled with a March 2004 advisory opinion issued by state Attorney General Eliot Spitzer. That guidance dictates that validly performed marriages of same-sex couples in Canada must be recognized as valid for retirement benefit purposes in New York, Hevesi announced.

Hevesi is sole trustee of the New York State and Local Retirement System, which covers nearly 1 million current and former government employees in the state.

Hevesi’s ruling came after an inquiry by Mark Daigneault about whether the pension system would extend benefits to same-sex partners. Daigneault is an Albany-area state employee who said he has been with his partner for 13 years and has two children.

“I think it’s a wonderful thing,” Daigneault said, according to the AP story. “I am very excited. It certainly is going to provide more protection for my family and my two children.”

Daigneault said he has not yet gone to Canada to be married. Courts in six Canadian provinces, including Quebec and Ontario, have ruled that denying marriage to same-sex couples violates their rights under the Canadian constitution.

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