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Chapter 3
Enrolling Participants in the Plan
Planning an Employee Communications Strategy
Before you can expect people to join
the 401(k) plan, you’re going to have to make them aware that it
exists; moreover, you must make them aware of the general and specific benefits that
participating in it affords. In other words, you’re going to have to
“sell” the plan to your fellow employees. It shouldn’t be a hard sell, though,
considering your product. A 401(k) Easy™ 401(k) plan is a great
benefit!
We’ve included a number of documents
to help you promote the plan to your co-workers. They are listed at the end of this
chapter. In addition, your 401(k) Easy™ package
includes a video slide presentation which you can present at the
enrollment meeting, or which you can excerpt information from to add to your own
presentation.
Entering Employees Into the 401(k) Easy™ Database
The initial entering of employees into
your 401(k) Easy™ database is a sixstep process:
1. Obtain from Payroll the names of all employees [except for members of any
groups excluded from your 401(k) Easy™ 401(k) plan] and the
data needed
for each employee that Payroll can provide (see below).
Important! Part-time
employees cannot be excluded as a
class.
Also, employers cannot exclude other classes of similarlynamed groups
(for example, “temporary” or “seasonal”). If an individual
employee meets the age and service requirements, he
or she is eligible. By law, anyone who
works 1000 hours or more during the calendar year meets the service
requirement and
anyone 21 years or older meets the age
requirement — such a person would automatically be eligible to join
when he or she
meets
the other eligibility criteria (e.g., length of service), if any.
2.
Enter this information into the 401(k) Easy™ database, as
well as needed information not provided by Payroll (see “Setting Up
the Database,“ below).
3.
401(k) Easy™ determines
which employees are and are not eligible. (Noneligible employees
remain in the database, however.)
4.
Conduct enrollment meeting(s) for eligible employees and distribute
enrollment materials to all who attend.
5.
Make sure all eligible employees who did not attend an enrollment meeting
get enrollment material. By regulation and practice, all eligible employees
must complete an enrollment form, even if they choose to decline!
Not
only is this good policy, it also protects to some degree the plan
sponsor.
6.
As enrollment applications are returned, enter the appropriate data for employees
entering the plan. (Be sure to keep all the enrollment applications
on file because they contain information you will need in the future.)
Setting Up the Database
Open 401(k) Easy™ and click
on Employee Information. The fields will be blank.
Click on New, and enter the first employee’s name (first, middle
initial, last) in the highlighted “Name” box. Enter the rest of
information for that employee through “Hired”: division (if
applicable), social security number, title (VIP), address, telephone number, date of
birth, and date hired (dates are month, day, and four-digit year).
The Amount of Contribution to Prior Plan
and Year of Contribution to Prior Plan relate to the limits on the amount
an employee can contribute in a year: either a certain percentage of their
salaries or a fixed dollar amount, whichever comes first. 401(k) Easy™
prevents employee contributions in excess of the limit for a given year.
These are the fields where you enter a new hire’s previous 401(k)
contributions for the current year.
(Until
you have an enrollment application, you cannot enter the Desired Current
Monthly Contribution or the date the employee joins the 401(k) plan.)
You must also check (by clicking on the associated
box) whether or not the employee is an officer of the company, a 1% or 5% owner, a
part-time employee, a union member, or a nonresident alien. (For
definitions of 5% and 1% owners, see the Glossary in the 401k Help®
CD-ROM.)
Because 99% of the time an employee with a social
security number is also a U.S. citizen, the US Citizen block automatically gets a
check when the social security number is entered. However, many non-U.S.
citizens have social security numbers; if any employee is not a U.S.
citizen, you can uncheck the box (it will not affect his or her eligibility if the
other requirements are met).
Many 401(k) Easy™ plans
now have automatic enrollment; if your company does not, or if an employee has chosen
not to accept automatic enrollment, check the Suppress Auto Enrollment box.
If the part-time, union member, or nonresident
alien box is checked, 401(k) Easy™ will declare that employee
ineligible, as applicable, if you chose such eligibility exclusions for your
company plan.
The 401(k) software calculates whether or not the
employee is eligible, and displays “Eligible” or “Ineligible” in the left of
the two lowest blank fields.
(When the employee terminates employment with the
company, “Terminated” appears in the box to the right of
“Eligible” when a date is entered for Termin.)
When you have finished entering data for the first
employee, click on New, and enter data for the second employee. Continue
until you have entered all employees.
Tip: Periodically, you will want to re-invite eligible
employees who have declined in the past to join the plan, You can
identify these by comparing the “Eligible”
versus “Participant” columns in the 401(k) Easy™
Employee Census report (on the assumption that eligibles who are not participants have chosen to decline). (See
Chapter 9 of the 401k Help®
CD-ROM.)
Entering
Enrollment Application Information Into 401(k) Easy™
An eligible employee’s completed
Enrollment Pac provides the rest of the information that you and 401(k)
Easy™
need to set up an account and properly process account activity.
To process information from an employee’s Enrollment Pac, click on Employee
Information in the “Welcome. . .” window. Click on the name of the
employee whose application you are processing (or add the employee by clicking
on New, as described above).
Next to Joined, add the date the employee joined the 401(k) Easy™
plan (2digit
month and day and 4-digit year), then click on Participant. A
check mark
will appear in the Participant box, and a screen titled “Employee Allocations”
will appear. This screen lets you list how the participant wants his or
her 401(k) contributions (plus any matching contributions) divided among
the plan’s investments.
Enter the first investment choice of the new enrollee by clicking on the
lefthand
box of the first blank line under “Portfolio”, then click on the
desired investment in the pull-down menu (at the right-hand side of the
Portfolio line). The investment will appear on the blank line. Then
enter the percentage
of his or her monthly contribution the employee has allocated to that
investment by entering the decimal number of the percentage (e.g., .2 for 20 percent, .15 for
15 percent).
Important! Some
investment companies stipulate that a
minimum amount ($50, for instance) be contributed to its investments. If
such is the case for your plan’s investments (as explained in the
investments’ prospectuses), the percentage of monthly contribution
allocated to a single investment cannot
equal less than the stated minimum ($50, for example). If the amount
allocated a single investment IS less than $50 in any given month,
401(k) Easy will allocate the month’s entire contribution to the
default choice (or to that indicated in the employee’s enrollment
form, if applicable).
Continue with the second investment on
the second line until all the enrollee’s choices and their percentages have been
entered. The total percentage must equal 100%. Then click on Exit to
return to the “Employee Information” window.
It is important that you enter the employee’s default selection. If you
don’t, a prompt will remind you that no default has been indicated,
although you will
be allowed to continue processing. However, 401(k) Easy™ does not consider the employee a participant until
the default choice is entered and will refuse data for that individual.
The Notes field in the “Employee Information” window is a good place
to remind yourself that you have to contact the employee.
Also,
the last line of the “Employee Allocations” window is a blank, with
a star in
the left-hand column. This shows the end of the list. If
you have any more blank
rows, you will not be able to exit the screen until you delete them. To
do so, click on the black arrow on the left and press Delete on your
keyboard.
When you have processed the first month’s actual contribution in
401(k) Easy™, for any new participant who needs to have an
account opened or for a participant who has no account numbers in the
system, a investment account application will automatically be issued. (Some no-load funds and
brokerage
companies require their own applications to be filled out and sent
in with the first allocation, in addition to the 401(k) Easy™ application. Please contact our 401(k) Easy office
for additional information.)
You’ll enter the account numbers into 401(k) Easy™ when you receive them from the investment account
company. The account numbers will be clearly identified on the
investment account statements that are mailed directly to you (with a duplicate mailed to
the participants) as soon as the purchase of shares is made. It
is important to enter the account numbers as soon as you receive them. If
you don’t, and you process another month’s contribution, the
software will print out another investment account application and the investment account company may
issue another account number, resulting in two account numbers assigned
to the same account.
Again, be sure you maintain a file of
all enrollment applications because they contain information, such as
beneficiary designations, you do not input into your software.
Associated 401(k) Easy™ Documents
·
Benefits of 401(k) Participation Pac
·
Enrollment Pac
·
Investment Decisions Pac
·
Notice to Interested Parties
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