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Automatic Enrollment and ERISA

Q: Suppose you have client that is a small 501(c)(3) and which sponsors an elective deferral 403(b) plan. The employer has limited involvement in order to maintain the plan as an ERISA exempt plan. The employer intends to add automatic enrollment to the plan; however, I am concerned that would subject the plan to ERISA requirements. Would adding automatic enrollment cause ERISA to apply?

A: I believe that adding automatic enrollment to the plan exceeds the limited involvement requirement under Department of Labor Regulation 2510.3-2, and would cause the plan to become an ERISA plan. As always, you should tell the employer to double check with their legal counsel, and provide the reference to the DOL regulation to help legal counsel respond to the employer’s question.

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