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SUPPLEMENTAL RETIREMENT PLAN AUTOMATIC-ENROLLMENT PROGRAM

SUPPLEMENTAL RETIREMENT PLAN AUTOMATIC-ENROLLMENT PROGRAM. ASSOCIATION OF SCHOOL BUSINESS OFFICIALS SEPTEMBER 24, 2008. Automatic Enrollment Program. Comes from the Pension Protection Act of 2006

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SUPPLEMENTAL RETIREMENT PLAN AUTOMATIC-ENROLLMENT PROGRAM

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  1. SUPPLEMENTAL RETIREMENT PLANAUTOMATIC-ENROLLMENT PROGRAM ASSOCIATION OF SCHOOL BUSINESS OFFICIALS SEPTEMBER 24, 2008

  2. Automatic Enrollment Program • Comes from the Pension Protection Act of 2006 • Strong impact on private sector defined contribution plans, but also a very good option for public sector plans, especially § 457 plans (SRP) • New rules based on permission and requirements found in HB 1020 (2008) • Legislature directed that program be laid out in administrative rules (ARSD) • New rules found primarily in ARSD chapter 62:03:07 • SDRS Board of Trustees adopted the rules on September 3 • Rules set for hearing before the Legislature’s Interim Rules Review Committee on October 2 • Rules in effect on October 22 (hopefully), but truly effective on July 1, 2009

  3. Automatic Enrollment Program TWO RULES CHANGES OUTSIDE OF ARSD CHAPTER 62:03:07: ARSD 62:03:01:01 amended to include definitions for “automatic enrollee” and for “automatic enrollment unit” ARSD 62:03:02:05.01 created to clarify that employer units may make contributions on behalf of employees -- start after a new hire’s opt-out period -- vest immediately with the participant

  4. Automatic Enrollment Program • Program applies only to new hires after July 1, 2009 (“automatic enrollees”). • Program applies only to employees of employer units that choose to participate (“automatic enrollment units”). A. Usual requirements for confirmation of participation B. Employer unit may later get out C. If unit gets out, automatic enrollees remain participants D. Units cannot participate until July 1, 2009

  5. Automatic Enrollment Program 3. Established contribution of $25 per month A. ARSD 62:03:03:01 has a $25 minimum deferral per monthB. Subject to change by auto-enrollee participant

  6. Automatic Enrollment Program • Ninety days to opt out of the Plan from “first pay date” • Auto-enrollee who opts out gets refund of contributions within 30 days thereafter (“permissible withdrawal”) A. Refund to include “associated gains or losses” B. Auto-enrollee who opts out may voluntarily participate later

  7. Automatic Enrollment Program • Adhere to notice requirements under IRS Revenue Rulings 98-30 and 2000-8 for automatic enrollees A. Initial notice of right to opt out sent within 15 days of system receipt of initial contribution B. Notice prior to end of first year regarding ongoing right to change deferrals and investment alternatives

  8. Automatic Enrollment Program 7. Automatic enrollment does not require advance authorization by enrollee in spite of any law or ordinance requiring authorization for payroll deduction.

  9. Automatic Enrollment Program • State investment officer selects “qualified default investment alternatives” (SDCL 3-13-51.1)A. One for initial 90-day periodB. Another after 90 days when participant makes no choiceC. Relief from liability for state investment officer, System, personnel or employer

  10. Automatic Enrollment Program 9. Automatic enrollee’s failure to opt out within 90 days deemed to be a contract to participate and election to have employer defer compensation for contributions

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