Automatic Enrollment Implementation
Is automatic enrollment permissible under law?
Partially
Explanation:
Employers as described in Section 148.042 of the Revised Code can voluntarily adopt an automatic enrollment arrangement, which can include automatic escalation at the election of the employer, and eligible employees are then automatically enrolled in the 457(b) plan.
Relevant State Laws – Ohio Admin. Code 4101:9-4-07; Ohio Rev. Code 148.04 (C); Ohio Rev. Code 148.042
“(A) The following deductions from wages may be made without application to and approval of commerce:
(1) Any deduction from wages required by federal, state, or local law;
(2) Any deduction of amounts required by court order, process, or judgment to be paid to another unless collusion or collaboration exists between the employer and the employee for whose benefit the deduction is made;
(3) Any deduction which constitutes a contribution by the employee to funds, plans, or programs established by the employer or representatives of employees, or both, for the purpose of providing either from principal or income, or both, medical or hospital care, pensions or annuities on retirement, death benefits…or vacation pay.”
“(B) The following deductions from wages may be made only if, prior to commencement of work by the employee on any project, employers procure and maintain, in writing, proof of voluntary deductions signed by the employee:
(1) Savings accounts or similar savings plans for the benefit of employees, their families and dependents;”
“(7) ‘Participating employees or participants’ – Those eligible employees who have elected to defer a portion of their compensation pursuant to a participation agreement or who have been automatically enrolled.
(8) ‘Participation agreement’ – The agreement between the eligible employer and the eligible employee by which an eligible employee adopts the plan agreement and elects to become a participating employee under the plan.
(9) ‘Automatic enrollment’ – Employers may adopt an arrangement under which in the absence of an affirmative election by their eligible employee, a certain amount of compensation may be automatically withheld from the eligible employee’s pay and contributed to the plan as a deferral.”
“(C)(1) Whenever an individual becomes employed in a position paid by warrant of the director of budget and management, the individual’s employer shall do both of the following at the time the employee completes the employee’s initial employment paperwork:
(a) Provide to the employee materials provided by the Ohio public employees deferred compensation program under division (B) of this section regarding the benefits of long-term savings through deferred compensation;
(b) Secure, in writing or by electronic means, the employee’s acknowledgment form regarding the employee’s desire to participate or not participate in a deferred compensation program offered by the board.”
Ohio Rev. Code 148.042 (effective beginning September 7, 2021)
“(A) As used in this section, ’employing authority’ means both of the following:
(1) The supreme court, house of representatives, senate, legislative service commission, secretary of state, auditor of state, treasurer of state, or attorney general with respect to employees of those entities;
(2) The director of administrative services, with respect to eligible employees employed in a position paid by warrant of the director of budget and management who are not employed by a person or entity listed in division (A)(1) of this section.
(B)(1) An employing authority may elect to automatically enroll employees described in division (C)(1) of this section in the Ohio public employees deferred compensation program. An employing authority that elects automatic enrollment shall notify the Ohio public employees deferred compensation board of that election. Automatic enrollment shall commence as soon as administratively practical for the board and the employing authority.”