Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

The following is not meant to be legal advice.

On February 14, 2007, Ropes & Gray gave a talk in San Francisco, CA on the Pension Protection Act of 2006.  The talk covered changes affecting 401(k), 403(b), and other individual account plans such as automatic enrollment, fiduciary protection for default investments, mapping of investment changes, investment advice, and rules for plans with company stock.

Plans do not need to offer automatic enrollment, but if they do, the employer needs to provide a matching contribution that vests within 2 years, and notice to employees to let them opt out.  The automatic enrollment provides a safe harbor for satisfying non-discrimination tests.

For the automatic enrollment feature, employers are still allowed to make employees wait even as long as a year to satisfy a time worked requirement before participating in a 401(k) plan.  The people who are made waiting do not count towards the participants used in the non-discrimination tests.  

If an employee does not opt out of an automatic enrollment plan prior to the plan deducting funds from the employee’s paycheck, the employee has 90 days to obtain a refund of the funds after the deductions begin.