How Do We Treat Rehires in an Auto-Enrolled 403(b) Plan?

“Our 403(b) plan is an automatic contribution arrangement (ACA), or auto-enrolled plan. However, our plan is NOT an Eligible Automatic Contribution Arrangement (EACA) or a Qualified Automatic Contribution Arrangement (QACA), primarily because we only enroll new hires, and not existing employees. My question is, how do we treat rehires in such an arrangement? Should we auto-enroll them as new hires, or treat them as existing employees who we would not auto enroll?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

The answer is, as it is to many compliance-related questions – it depends on what your plan document says. Since your arrangement is an ACA, you would have the option to either treat rehires as existing employees for auto-enrollment purposes (and not automatically enroll them) or treat them as new hires for auto-enrollment purposes (and automatically enroll them). But this treatment should be clearly stated in your plan document; if your plan document is silent on this issue, it should be amended accordingly.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice. 

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