Automatic Enrollment Implementation

Is automatic enrollment permissible under law?
Partially

Explanation:
All full-time state employees hired after January 1, 2017 are automatically enrolled in the state’s 457 deferred compensation plan. Political subdivisions participating in the state plan can opt-in to automatic enrollment, but only a limited number of agencies have chosen to do so. Political subdivisions not participating in the state plan are unable to implement automatic enrollment due to laws preventing wage deferrals.

Relevant State Laws -Wash. Rev. Code Ann. § 49.48.010, § 41.50.770

“It shall be unlawful for any employer to withhold or divert any portion of an employee’s wages unless the deduction is:

(1) Required by state or federal law; or

(2) Specifically agreed upon orally or in writing by the employee and employer; or

(3) For medical, surgical, or hospital care or service, pursuant to any rule or regulation: PROVIDED, HOWEVER, That the deduction is openly, clearly, and in due course recorded in the employer’s books and records.” Wash. Rev. Code Ann. § 49.48.010

Washington’s statute authorizing the state and political subdivisions to establish deferred compensation plans provides that public employers are “authorized to contract with an employee to defer a portion of that employee’s income . . . .” Wash. Rev. Code Ann. § 41.50.770

Washington’s statute authorizing the state and political subdivisions to establish deferred compensation plans also says that, “[b]eginning no later than January 1, 2017, all persons newly employed by the state on a full-time basis who are eligible to participate in a deferred compensation plan under 26 U.S.C. Sec. 457 shall be enrolled in the state deferred compensation plan unless the employee affirmatively elects to waive participation in the plan. Persons who participate in the plan without having selected a deferral amount or investment option shall contribute three percent of taxable compensation to their plan account which shall be invested in a default option selected by the state investment board in consultation with the director. This subsection does not apply to higher education undergraduate and graduate student employees and shall be administered consistent with the requirements of the federal internal revenue code.” Wash. Rev. Code Ann. § 41.50.770

“[b]eginning no later than January 1, 2017, any county, municipality, or other political subdivision offering the state deferred compensation plan authorized under [Wash. Rev. Code Ann. § 41.50.770], may choose to administer the plan with an opt-out feature for new employees as described [with regard to state employees].” Wash. Rev. Code Ann. § 41.50.770

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