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Can I Be Automatically Enrolled in My Employer's 401(k) plan?


In a word: Yes. The IRS has long permitted employers to automatically enroll employees in 401(k) plans. These are sometimes referred to as "negative enrollments" because you have to opt out of participation.

Employer Liability
Some employers have shied away from automatic enrollment plans because they were concerned that automatic payroll deductions might not be permitted under state law. Others were concerned that the default investments they chose for employees might be found to be "imprudent," resulting in fiduciary liability for any investment losses incurred by those employees. In order to address these concerns, and to encourage retirement savings, Congress included provisions in the Pension Protection Act of 2006 that make automatic enrollment plans more attractive to employers.

You Must Get the Paperwork...and Then Read It
In general, your plan administrator must provide you with a notice that explains the plan, notifies you of your right to reduce or stop the contributions, and to change the default investments that have been chosen for you. Your plan may also provide a 90-day period in which you can opt out of the auto-enrollment arrangement and receive a refund of your contributions (plus any earnings).

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