Welcome to Part 2 of our series on retirement planning for your employees. Part 1 discussed the different types of retirement plans you can offer to your employees. This month we will look at when your employees become eligible and how to get them signed up for your plan.
As an employer, you will need to decide who can participate in your plan.
Plan rules can vary, and those rules will get outlined in your plan document. The plan document will govern how your plan should be ran. You can require that your employees work for the company for a certain period of time before they become eligible to participate. Years of age, hours worked, and employee classifications within the company are all different eligibility requirements a plan can have in place.
After determining eligibility requirements the plan should establish entrance dates into the plan for those eligible. Some plans allow eligible employees to enter the plan on the day they meet those eligibility requirements. A plan could have in place a yearly, quarterly, or monthly entrance dates as well.
For example, you can require an employee to be at least 21 years old, to have a year of service with the company, and can enter the plan only on January 1st of the year before the employee can participate in a plan. However, some plans may allow employees to begin participation before reaching age 21 or completing one year of service or can partake in the plan on the actual day they hit their eligibility requirement without having to wait for a specific entry date. This is all determines by what the company places in their plan documents.
Some retirement plans enroll employees automatically. This means that your employees will automatically become a participant in the plan unless they choose to opt out. The plan will deduct a set contribution amount from the employee’s paycheck and put it into a predetermined investment, unless the employee deems otherwise.
If you have an automatic enrollment plan, employees should receive a notice describing the automatic contribution process, when their participation begins, any opportunity they have to opt out of the plan or change contribution level, and where automatic contributions are invested.
All employees need to be made aware of the plans existence and eligibility requirements. Communications in languages other than English may be necessary depending on your employee population base.