Automatic Enrollment

The Pension Protection Act of 2006 (PPA) clears the way for 401(k) plan sponsors to implement automatic enrollment and offers a number of benefits to employers who do so.

Seligman Growth 401(k) features: No additional charge for automatic enrollment — plan document support — sample notices regarding default investments and annual increases — full package of employee communications materials

How does automatic enrollment work?

All eligible employees are enrolled in the plan unless they affirmatively opt out. The plan sponsor selects the initial rate of salary deferral, as well as an optional schedule for future rate increases. Employees must be notified in advance of the automatic enrollment, and retain the right to change their elections at any time, including the right to discontinue deferrals.

Is automatic enrollment an option for all 401(k) plan sponsors?

Yes! The PPA allows all 401(k) plan sponsors to implement automatic enrollment by immediately pre-empting any state wage withholding laws.

Why consider automatic enrollment for a retirement plan?

  • Help employees prepare for retirement.
  • Maximize use of the benefit offered to employees.
  • Avoid problems with non-discrimination testing. Low participation among lower-paid employees can limit contributions by highly-compensated employees. Increasing participation rates with automatic enrollment can help plans pass the tests. Top-heavy and ADP/ACP testing requirements are waived for plans following the Safe Harbor formula of automatic enrollment with automatic deferral increases.

Automatic Enrollment Safe Harbor Formula

NOTES

This material is provided for general information purposes only, and does not constitute specific tax, legal, or investment advice for any person. Seligman Advisors and its representatives do not provide tax, accounting, or legal advice.

This information is authorized for use only in the case of concurrent or prior delivery of the offering prospectus of the Fund. You should consider the investment objectives, risks, charges, and expenses of a Fund carefully before investing. A prospectus containing information about a Fund (including its investment objectives, risks, charges, expenses, and other information about the Fund) may be obtained here. The prospectus should be read carefully before investing in a Fund.

The Seligman Funds are managed by J. & W. Seligman & Co. Incorporated (Seligman). The Seligman Mutual Funds are distributed by Seligman Advisors, Inc. Seligman Services, Inc. provides client services to Fund shareholders. Seligman Advisors, Inc. and Seligman Services, Inc. are wholly-owned subsidiaries of Seligman.

Distributed by Seligman Advisors, Inc.