Automatic Enrollment Implementation
Is automatic enrollment permissible under law?
Yes
Explanation:
State employees hired after 2007 not participating in the state’s 403(b)plan or hybrid program are automatically enrolled by statute. Automatic enrollment is permitted for employees of political subdivisions, but currently none have adopted the program.
Relevant State Laws – Va. Code Ann. § 40.1-29, § 51.1-601.1, § 51.1-603.
“Virginia’s general wage withholding statute prohibits employers from withholding wages except for payroll, wage or withholding taxes or in accordance with law, without the written and signed authorization of the employee.” Va. Code Ann. § 40.1-29.
State Employees: All employees of the Commonwealth and its agencies hired or rehired after 2007 not participating in a 403(b) plan or Virginia’s hybrid retirement program “shall participate in [Virginia’s deferred compensation plan], unless such employee elects, in a manner prescribed by the Board, not to participate in such plan. The amount of the deferral for any such employee participating in the plan shall equal, on a semimonthly basis, $20 of otherwise payable compensation, unless the employee elects to defer a different amount.” Va. Code Ann. § 51.1-601.1.
Political Subdivision Adopting Virginia’s Deferred Compensation Plan: If a political subdivision enters into an agreement with the Virginia Retirement System for its employees to participate in the Virginia Deferred Compensation Plan, the political subdivision may “provide in the agreement that its employees who (i) commence employment or reemployment on or after a specified date occurring on or after the effective date of this provision in the agreement, (ii) are not participating in[the hybrid retirement program], and (iii) have not affirmatively elected to participate in [Virginia’s deferred compensation plan] or a plan established by such political subdivision pursuant to § 403(b) of the Internal Revenue Code of 1986, as amended, shall participate in either [Virginia’s deferred compensation plan] or a 403(b) plan, as determined by the political subdivision, unless such employee elects, in a manner prescribed by the Board, not to participate in such plan. The amount of the deferral for any such employee participating in the plan shall equal, on a semimonthly basis, $20 of otherwise payable compensation, unless the employee elects to defer a greater amount.” Va. Code Ann. § 51.1- 603.1.
Political Subdivision Establishing a Deferred Compensation Plan for Itself: Virginia’s statute permitting political subdivisions to establish deferred compensation plans also permits political subdivisions to provide that its employees who commence employment or reemployment on or after a specified date, and who have not affirmatively elected to participate in such deferred compensation plan or in a plan established by such political subdivision pursuant to § 403(b) of the Internal Revenue Code of 1986, as amended, shall participate in either such deferred compensation plan or 403(b) plan, as determined by the political subdivision, at such initial default amount or rate of deferral as it may determine, unless such employee elects, in a manner prescribed by the plan administrator, not to participate in the plan. Va. Code Ann. § 51.1-603.