Automatic Enrollment Guide
Transcript of Automatic Enrollment Guide
Automatic Enrollment Guide
Introducing Automatic
Enrollment
Almost daily, new statistics are showing employers (plan sponsors) are taking a more
proactive role in helping their employees save for retirement. One of the most common
approaches has been to implement an automatic contribution arrangement (also known as
“automatic enrollment” or “negative election” arrangement) in the employer’s retirement
plan along with an automatic annual increase (also known as “automatic escalation”) feature.
Under an automatic contribution arrangement, the employer automatically enrolls eligible
employees into a 403(b) or 401(k) plan and begins to remit at the plan’s default percentage
with a possible annual “escalation”. The default percentage is generally a fixed percentage of
pay. Employees may opt out of automatic enrollment or select a different deferral
percentage (including zero). However, this program was designed to encourage plan
enrollment for those employees who previously did not take the initiative to enroll or did not
understand the consequences of delayed enrollment into the plan.
Employers must assess their purpose for offering a retirement plan and consider what
features are right for the plan and its participants. Is the goal for employees to be able to
retire with a sufficient amount of retirement savings? If so, the employer needs to determine
new ways to encourage employees who are not saving at all, not saving enough, or not
properly investing to achieve the goal.
Most benefit decisions are typically made when an employee is hired. Some employees may
find the number of decisions overwhelming and delay some decisions until a later time.
While most employees know they should save for retirement, they may not understand the
significant impact delayed enrollment can have on their retirement savings. An employer
may think that the current employees not enrolled have already made their decision to not
participate in the plan. However, it could be they haven’t taken the time to enroll or don’t
understand the importance of saving. Current employees may consider automatic enrollment
the jump start they need to begin saving for their retirement.
On the other hand, a large percentage of employees may already be participating in the plan.
However, they may be saving at a low deferral rate or not contributing enough to take full
advantage of the employer matching contributions. Implementing an automatic contribution
arrangement can assist in these instances as well.
With automatic enrollment, the employee’s decision may be to: accept the employer’s
suggested automatic deferral rate(s) to save for retirement, opt out of the plan, or save at a
different deferral rate (hopefully higher) than the plan’s automatic deferral default. By
properly communicating the plan features, the employee has adequate time and information
to help with those decisions.
GuideStone has prepared this informational piece to help address questions employers may
have in regard to automatically enrolling employees into the retirement plan.
Questions to consider before adding automatic enrollment to an
employer’s retirement plan
Section 1: General Information
Can 403(b) and 401(k) plans contain an automatic contribution
arrangement?
Yes, automatic contribution arrangements are permitted in 401(k) and 403(b) plans.
Can an employer legally withhold money from the employee’s
compensation without his or her written consent?
The IRS has ruled that 403(b) and 401(k) plans can treat participants under an automatic
contribution arrangement as having elected to defer the plan’s set percentage of
compensation until they affirmatively change the election or opt out. The plan must give the
employee notice of his right to make an election and allow the employee to revoke the
default election at any time.1
A potential challenge with automatically enrolling employees is that some states have laws
designed to protect employee wages from employer deductions and/or access by creditors.
The Pension Protection Act of 2006 (PPA) confirmed that plans subject to the Employee
Retirement Income Security Act of 1974 (ERISA) are not subject to the state’s laws on
withholding when using automatic contribution arrangements. However, non-electing
church plans, such as 403(b)(9) retirement plans and 401(k) church plans offered by
GuideStone, do not currently have the benefit of pre-emption. Thus, some of these state
laws may adversely affect an employer’s ability to implement an automatic contribution
arrangement in certain states.
On the other hand, these state laws were not aimed at involuntary payroll withholding that is
for the benefit of employees, so it is possible the state laws do not prevent automatic
contribution arrangement. It is recommended legal counsel be consulted for advice on state
law or other issues impacting the plan.
1 See Revenue Rulings 98-30, 2000-8, and 2000-35 and Regulations §1.401(k)-1(a) (3) (ii) &
(f) (4) (ii).
How will the employer know what the state law is in its state (or
in multiple states, if the employer sponsors a plan for entities in
various states)?
GuideStone has not embarked on an exhaustive analysis of state laws that might impact
automatic contribution arrangements and is not seeking to analyze or monitor state law
issues in this area. GuideStone does not provide tax or legal advice, so any information
GuideStone provides is general in nature and does not take into account specific facts and
circumstances. As a result of discussions with others in the employee benefit community,
GuideStone has obtained the general information described below that was generally current
as of January 1, 2007. This information relayed by GuideStone is only intended to bring
awareness of the issues. Please be reminded that the organization and its legal counsel
should review any applicable state law before implementing an automatic
contribution arrangement in the plan as these laws may change.
Some states have apparently not addressed involuntary deductions clearly; therefore, there
may be no prohibition. There appear to be 15 such states: Alabama, Alaska, Arkansas,
Florida, Georgia, Louisiana, Mississippi, Montana, Nebraska, Ohio, Pennsylvania, South
Dakota, Tennessee, Vermont and Wisconsin.
A plurality of states appears to allow involuntary deductions from pay when state or federal
law permits or requires. If the Internal Revenue Code regulations and IRS rulings noted
above are treated as federal law, then an automatic contribution arrangement is legal in these
states. There appear to be 19 such states: Arizona, Connecticut, Delaware, Hawaii, Idaho,
Iowa, Kentucky, Maryland, Massachusetts, Michigan, New Hampshire, New Mexico, New
York, North Carolina, North Dakota, Oklahoma, South Carolina, Texas and Virginia.
Still other states appear to require employee consent to payroll withholding. In these states, it
appears to be problematic because once an employer gets employee consent it might as well
get an enrollment form and salary reduction agreement. There appear to be 11 such states:
California, Indiana, Maine, Minnesota, Missouri, Nevada, New Jersey, Oregon, Rhode
Island, Utah and Wyoming.
There are also five other states, along with the District of Columbia, with other types of
provisions: District of Columbia (court order needed), Illinois (withholding for the benefit of
the employee), Kansas (House Bill 2669, adopted, signed, and effective July 1, 2006,
specifically allows automatic enrollment), Washington (employer policy made known to
employee, with employee acquiescence, authorizes payroll withholding), West Virginia
(pension withholding authorized), and Colorado (Senate Bill 35, scheduled to take effect in
January 2011, specifically allows for automatic enrollment even in plans not subject to
ERISA).
What is an Eligible Automatic Contribution Arrangement?
A plan must satisfy additional requirements to be an Eligible Automatic Contribution
Arrangement (EACA). For example, there are certain notice requirements that must be met
as described below (see section 5) and certain “uniformity” requirements. Some EACAs
qualify for an extended correction period for failed non-discrimination (ADP/ACP) tests.
An attractive feature of an EACA is that a plan with such an arrangement can elect to
provide participants the ability to request a refund of automatically withheld amounts within
90 days (see section 6).
What is a Qualified Automatic Contribution Arrangement?
A Qualified Automatic Contribution Arrangement (QACA) is a type of safe-harbor plan
(i.e., not subject to certain non-discrimination tests) that generally follows EACA rules but
requires an employer contribution that matches at least 100% of first 1% and 50% of next
5% or a 3% non-elective contribution. If the initial deferral amount does not begin at 6%,
then the plan must apply an annual, automatic increase until the deferral rate is no less than
6% and no more than 10%. In addition, employer matching contributions must be 100%
vested after two years. For more information, please contact your GuideStone relationship
manager.
Can a plan include an automatic contribution arrangement
without being an EACA or QACA?
Yes, an automatic contribution arrangement allows either a partial or full-year
implementation effective date, is not subject to the uniformity requirements regarding the
increase and deferral amounts (if the plan is a church plan), and does not allow the 90 day
“refund” rule.
All Q&As in the following sections are related to EACAs unless otherwise stated.
Section 2: Implementation
Will the implementation of an automatic contribution
arrangement require an amendment to the plan?
Yes. If more information is needed please contact your GuideStone relationship manager.
How does an employer successfully implement automatic
features?
Clear and concise communication for all affected employees allows the automatic features to
be more successfully implemented. Communication is the most important factor in the
success of automatically enrolling employees. It’s always important to educate employees
about the provisions of the plan and saving for retirement.
One strategy that can be effective is encouraging eligible employees to enroll on their own
when hired. Making them aware of the default settings may encourage them to take action
on their own and allow them to be a more active participant. Doing this may also result in
higher contribution rates and the participants choosing their own investments.
When should an automatic contribution arrangement begin?
Under EACA, the feature must generally be effective as of the first day of the plan year
unless it is included in a newly established plan or the EACA is appropriately limited to
newly eligible employees. For example, if a plan defines “covered employees” as only those
employees who become eligible for the plan after a certain date (e.g. June 1, 2012) and
complies with the notice requirement for newly eligible employees, the EACA can be
implemented on other than the first day of the plan year.
However, for plans subject to retirement plan non-discrimination testing, such as plans for
colleges and universities, an EACA that does not cover all employees eligible to participate
in the plan is not entitled to the extended six-month, excise tax free, period for correcting
retirement plan non-discrimination testing failures.
What are the administrative factors that Human Resources will
need to consider prior to implementing an automatic
contribution arrangement? The administrative factors include:
sending the initial and annual notices to eligible participants,
tracking those who opted out or are deferring a different percentage,
factoring the costs associated with matching contributions (if applicable),
determining when the annual increases should occur (if applicable),
tracking the expiration of affirmative elections annually or upon some stated event (if applicable)
If my organization is interested in implementing automatic
enrollment, what is my first step?
If you are interested in establishing an automatic contribution arrangement for your
employees, or would like more information, please contact your GuideStone relationship
manager.
Section 3: Enrollment
Who should be automatically enrolled?
Under EACA, the employer must implement this feature to all eligible “covered employees”:
generally new hires and current employees. Employers also have the option to limit “covered
employees” to employees who become eligible after a certain date.
When should enrollment begin?
An employer cannot deduct any automatic enrollment contributions from an employee’s
wages until the employee has had a reasonable time to make an affirmative election after
receiving the notice described below. An affirmative election means the employee has
decided not to participate in the automatic contribution arrangement or wants to contribute
an amount different from the plan’s default rate.
For new hires, an employer may choose to make employees aware on their first day of
employment that they will be automatically enrolled, but the actual deduction date can vary.
The employer should consider waiting until the first pay-period that is 30 to 60 days after
hire date to allow time for employees to receive the required notice and time to choose their
own deferral rate and investments.
For enrolling existing eligible employees, the employer may want to choose 60 to 90 days to
provide enough time for the employees to learn about the new feature before implementing
the deduction. This will allow enough time for employees to choose their own deferral or
opt out of the plan before the default is implemented.
How do participants select their investment option?
The participant will be automatically enrolled in the plan’s default fund that is described in the
GuideStone Funds Prospectus. They have the option at any time to make fund exchanges and/or
future allocation changes simply by accessing their account online at www.MyGuideStone.org or by
calling our toll-free number 1-888-98-GUIDE (1-888-984-8433). This information will be included
in the annual notice.
Section 4: Automatic Deferral Rates and Annual Increases
Who selects the default deferral rate?
The employer chooses the deferral rate for employees automatically enrolled into the plan.
Industry standards range from 1% to 3% of the employee’s compensation. If the plan
includes a matching contribution, consider using at least the minimum percentage required
to receive the match so participants can take full advantage of the matching feature.
What is an automatic annual increase?
This feature acknowledges that the initial automatic enrollment default percentage may not
be enough to adequately meet the employee’s retirement needs. Implementing an annual
increase to the plan slowly increases the deferral percentage up to a specific maximum
amount (typically around 10%). Under EACA, the annual increase percentage must be based
on the number of years the participant has been enrolled under the automatic contribution
arrangement, not the participant’s years of plan participation or years of service.
Alternatively, the increase can also be made on a single date each plan year. For instance, to
coordinate with the employer’s time period for compensation increases if all salary increases
happen at the same time each year, the employer may elect to increase the percentage on the
day compensation increases for all participants. If salary increases are based on anniversary
of hire date, the employer may still pick a single date for increases (e.g. March 1 for everyone
regardless of when compensation increases.)
In addition, as discussed above, some employers are choosing to implement automatic
annual increases to continue in their efforts to assist employees in building adequate savings.
Typically, the annual increases are one percent until they have reached a maximum of six to
ten percent. Starting to save is significant; however, building upon that foundation is just as
important.
Section 5: Required Notices
What information needs to be included in the notices, and when
are they provided to the employees?
The employer will have notice obligations under an automatic contribution arrangement.
GuideStone has sample notices that an employer can use to develop its own notice. The
sample notices can be found in the Appendix of this information piece. In addition,
GuideStone can work with the employer to draft a notice that is specific to the plan and
administrative needs.
The notices must be provided when employees are first eligible to participate. Among other
things, the notice must explain that tax-sheltered contributions (or Roth contributions, if
permitted under the plan) will automatically be reduced from their compensation. This
notice must also inform employees that they have the right either to opt out of the automatic
compensation reduction or to change the amount of their deferrals. Also, the notice must
describe the process for exercising those rights, including any timing rules. It is
recommended that the default fund be described as well.
If an employer adopts an automatic contribution arrangement in an existing plan, and
employees, who are already eligible to participate in the plan, are considered “covered
employees”, all employees must receive the same type of notice described above prior to the
effective date of the automatic contribution arrangement.
All newly eligible employees (including employees who are eligible prior to the effective date
of the automatic contribution provision in an existing plan) who are “covered employees”
must be provided with the notice before tax-sheltered contributions (or Roth contributions)
are first deducted from their compensation. This notice must be given sufficiently in advance
so employees will have enough time to opt out of the automatic contribution arrangement or
elect to contribute a different amount to the plan prior to the first reduction in their
compensation.
All employees eligible to make tax-sheltered contributions (or Roth contributions) who are
“covered employees” should also be notified annually of the amount that is being taken
from their compensation and about their right to change that amount or stop making any
contributions. Again, the notice should include the procedure for exercising that right, the
deadline for requesting a change in the amount of the contribution, and the default
investment.
In addition, if the employer chooses to implement automatic annual increases, the employer
will need to:
Monitor each employee’s deferral percentage to track the amount and timing of the increases.
Accommodate those employees who have opted out of the program or opted in at a
different amount.
Work with the payroll department or payroll provider to determine whether they
can assist with automatically increasing contribution percentages.
Section 6: Permissive Distributions
What is a “permissive distribution”?
If the plan contains an EACA, it may allow an employee to withdraw automatic enrollment
contributions. The employee must make a withdrawal election within the time stated in the
plan (no less than 30 days or more than 90 days from when the employee first had any
automatic enrollment contributions deducted).
An employee who elects to withdraw automatic enrollment contributions forfeits any
matching employer contributions that would have been made with respect to the automatic
enrollment contributions.
Any pre-tax automatic enrollment contributions that an employee withdraws are taxable
income to the employee in the year they are distributed. The withdrawn amount is not
subject to the additional 10% tax that normally applies to early distributions from retirement
plans.
Are permissive distributions allowed in all automatic
contribution arrangements?
No. The permissive distribution is a provision that only certain plans can elect to implement.
As stated above, a plan that has a default deferral provision but does not qualify as an
EACA, is not allowed to offer permissive distributions.
What action can the employer take if an employee meant to opt
out but forgot to contact Human Resources before contributions
were reduced from his or her compensation?
In the event an employee did not opt out of making deferrals into the retirement plan prior
to the start of reducing contributions from their compensation, he or she will need to
contact the Human Resources department to cease future contributions by completing a
Salary Reduction Agreement form indicating he or she affirmatively elects no further reductions.
Under EACA, the employer may elect to add a permissive distribution provision as
described above.
Is the permissive distribution adjusted for investment gain or
loss?
Yes, the distribution of default deferrals should be adjusted for any investment loss or gain.
While care has been taken in preparation of this information, no warranty, express or implied, is given to any
person or entity with respect to the accuracy of the information. The general information in this document is
not intended to be, nor should it be treated as, tax, legal or accounting advice. Since GuideStone cannot
provide tax or legal advice, you are always encouraged to consult with your organization’s tax or legal advisers
regarding the impact of automatic enrollment.
Appendix
ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGEMENT
403(b)(9) RETIREMENT PLAN
INITIAL NOTIFICATION OF SALARY REDUCTION AMOUNT
To: Participant
From: Employer
Date:
You are a participant in the <<Employer>> 403(b)(9) Retirement Plan (“Plan”).
Effective <<Date>>. <<Employer>> will automatically reduce your Compensation
<<_____% or $_____>> as a <<tax-sheltered>> <<Roth>> contribution to the Plan
unless you have a prior Salary Reduction Agreement form on file for an amount greater than the
deferral amount above. For the automatic deferral to be effective, you do not need to do
anything.
You have the right to change your salary reduction amount at any time. The automatic
deferral percentage will remain in effect until you revoke or modify it. To defer more or less
(including zero) than the automatic deferral percentage, you will need to complete a new
Salary Reduction Agreement form and give it to your Human Resources department. Your
election will not be effective with respect to any paycheck you already have received when
you complete and return a Salary Reduction Agreement form. Please refer to the retirement Plan
Summary for a more detailed explanation of the Plan provisions or contact your Human
Resources.
If you do not complete the attached Salary Reduction Agreement form, the automatic
deferral percentage will apply <<Effective Date>> and will not change unless you complete
and return a NEW Salary Reduction Agreement form.
The automatic deferral percentage will override a prior Salary Reduction Agreement
form if you previously elected a deferral percentage less than the automatic
deferral percentage, unless you complete and return a NEW Salary Reduction
Agreement form.
The automatic deferral percentage will not override a prior Salary Reduction
Agreement form if you previously elected a deferral percentage more than the
automatic deferral percentage.
The automatic deferral amount provided under the Plan may not adequately meet your
retirement needs. You can find out more information about how much you need to save for
your retirement by accessing your MyGuideStone account online at www.GuideStone.org, or
you may want to consult with your financial advisor on how to achieve your retirement
saving goal.
<<Optional>>In addition to the automatic deferral percentage described
above,<<Employer>> is implementing an annual deferral increase of <<_____% or
$_____)>> per year until your deferral <<percentage or amount>> reaches <<(_____% or
$_____)>> of your pay. You may opt out of the increase by completing a new Salary
Reduction Agreement form and giving it to your Human Resources department. If your
automatic enrollment began 90 days before your first scheduled increase date, your
automatic increases will not begin until the next scheduled increase date.
<<Optional>>Limited right to withdrawal automatic deferrals. For a limited time,
you may elect to have the Plan distribute to you all of your prior automatic deferrals and
allocable earnings on the deferrals. You may make this election on the Eligible Automatic
Contribution Arrangements Refund form the Plan Administrator will provide to you upon
request. You must make this election no later than 90 days after the first automatic deferral
is taken from your compensation. If you elect to withdraw all of your prior automatic
deferrals, you will pay income tax on the distributed amount, but you will not be subject to
the 10% premature distribution penalty tax, even if you received the distribution prior to age
59½. <<If you elect to withdraw your prior automatic deferrals, you will forfeit any
matching employer contributions related to those deferrals, if applicable.>>
Right to direct investment/default investment. You have the right to direct the
investment of your elective and non-elective deferrals in any of the investment choices
offered by the Plan. If you do not make an election as to how the Plan should invest your
deferrals, then the deferrals will be invested in one of the MyDestination Funds® based on your
time horizon to an assumed retirement target that is on or near the age of 65. The general
characteristics of MyDestination Funds (Funds) are described below:
Investment Objective: To seek the highest total return over time
consistent with its asset mix. Total return includes capital appreciation and
income.
Risk and return characteristics: The Funds’ strategy is to pursue the
maximum amount of capital growth, consistent with a reasonable amount of
risk, during a shareholder’s pre-retirement and early retirement years, and to
adjust the Funds’ asset mix to increase exposure to investments in fixed-
income securities and short-term bonds during a shareholder’s later
retirement years and 15 years after the target retirement year.
Fees and expenses: For more information about the fees and expenses
of the Funds offered through GuideStone, you may obtain a copy of the
Prospectus by going to www.GuideStoneFunds.org or calling 1-888-98-GUIDE
(1-888-984-8433).
Right to alternative investment: Even if your deferrals are invested in the
default Fund, you have the continuing right to direct your deferrals into other
investment choices offered at any time. You are entitled to invest in any of the
investment choices without incurring a financial penalty.
Additional Information about the Plan
<<Option 1>>: Definition of Compensation upon which contributions are based.
<<Employer>> defines compensation as ____________________.
<<Employer>> provides a generous contribution to your account.
______________________________________________.
<<Option 2>> Please consult the Contribution section of the Plan Summary for
information on the definition of Compensation and Employer Contributions.
Making or changing your deferral election. You may make or change your deferral
election at any time by completing a new Salary Reduction Agreement form and giving it to
your Human Resources department. Please note the deferral changes will affect future
deferrals.
Withdrawal and Vesting Provisions. You generally may not withdraw your elective
deferrals except when one of the following events occurs: severance from service with the
Employer, death, disability or attainment of age 59½. You are always 100% vested in your
elective deferrals. You are allowed to withdraw any rollover contributions you have made to
the Plan as well as after-tax contributions. Whether contributions transferred to the Plan are
distributable is based on your employment status with the employer from which the funds
were transferred.
You may be able to take out certain money if you have a hardship. Hardship distributions
are limited to the dollar amount of your contributions. Hardship distributions must be for a
specified reason – for qualifying medical expenses, costs of purchasing your principal
residence (or preventing eviction from or foreclosure on your principal residence, or
repairing qualifying damages to your principal residence), qualifying post-secondary
education expenses, or qualifying burial or funeral expenses. Before you can take a hardship
distribution, you must have taken other permitted withdrawals and loans from other plans of
the employer. If you take a hardship distribution, you may not contribute to the plan or
other qualifying company plans for six months.
You are eligible for a distribution of your employer contributions at severance from
employment <<and at age 59½>>.
<<Your employer contributions are 100% vested.>> <<Your employer contributions
are fully vested after ___ years. See schedule below: >>
<<Loans are permitted in the Plan.>>
For further information. Consult your Human Resources department, if you
have any questions regarding your rights and obligations under the Plan or if you
would like a copy of your Plan Summary at:
Address:
Telephone:
The MyDestination Funds (Funds) attempt to achieve their objectives by investing in the GuideStone Select Funds. The Funds are managed to a retirement date (target date) by adjusting the percentage of fixed income securities and equity securities to become more conservative each year until reaching the retirement year and then approximately 15 years thereafter. The target date in the name of the Funds is the approximate date when an investor plans to start withdrawing money. By investing in the Funds you will also incur the expenses and risks of the underlying Select Funds. The principal risks of the Funds will change depending on the asset mix of the Select Funds in which they invest. You may directly invest in the Select Funds. The Funds’ value will go up and down in response to changes in the share prices of the investments that they own. The amount invested in the Fund is not guaranteed to increase, is not guaranteed against loss, nor is the amount of the original investment guaranteed at the target date. It is possible to lose money by investing in the Funds.
ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGEMENT
403(b)(9) RETIREMENT PLAN
NEW EMPLOYEE NOTIFICATION OF SALARY REDUCTION
AMOUNT
To: Participant
From: Employer
Date:
You are a participant in the <<Employer>> 403(b)(9) Retirement Plan (Plan). As a
benefit to you in preparing for your retirement, the Plan provides for an automatic deferral.
<<Employer>> will reduce your Compensation by <<_____% or $_____>> as a <<tax-
sheltered (pre-tax)>> <<Roth (after-tax)>> and will pay the withheld amount to the Plan.
For the automatic deferral to be effective, you do not need to do anything.
You have the right to change your salary reduction amount at any time. The automatic
deferral percentage will remain in effect until you revoke or modify it. To defer more or less
(including zero) than the automatic deferral percentage, you will need to complete a new
Salary Reduction Agreement form by <<Date>> and give it to your Human Resources
department. Please refer to the Retirement Plan Summary for a more detailed explanation of
the Plan provisions or contact your Human Resources.
The automatic deferral amount provided under the Plan may not adequately meet your
retirement needs. Once you are participating in the Plan, you can find out more information
about how much you need to save for your retirement by accessing your MyGuideStone
account online at www.GuideStone.org, or you may want to consult with your financial advisor
on how to achieve your retirement saving goal.
<<Optional>>In addition to the automatic deferral percentage described
above,<<Employer>> is implementing an annual deferral increase of <<_____% or
$_____)>> per year until your deferral <<percentage or amount>> reaches <<(_____% or
$_____)>> of your pay. You may opt out of the increase by completing a new Salary
Reduction Agreement form and giving it to your Human Resources department. If your
automatic enrollment began 90 days before your first scheduled increase date, your
automatic increases will not begin until the next scheduled increase date.
<<Optional>>Limited right to withdrawal automatic deferrals. For a limited time,
you may elect to have the Plan distribute to you all of your prior automatic deferrals and
allocable earnings on the deferrals. You may make this election on the Eligible Automatic
Contribution Arrangements Refund form the Plan Administrator will provide to you upon
request. You must make this election no later than 90 days after the first automatic deferral
is taken from your compensation. If you elect to withdraw all of your prior automatic
deferrals, you will pay income tax on the distributed amount, but you will not be subject to
the 10% premature distribution penalty tax, even if you received the distribution prior to age
59½. <<If you elect to withdraw your prior automatic deferrals, you will forfeit any
matching employer contributions related to those deferrals, if applicable.>>
Right to direct investment/default investment. You have the right to direct the
investment of your elective and non-elective deferrals in any of the investment choices
offered by the Plan. If you do not make an election as to how the Plan should invest your
deferrals, then the deferrals will be invested in one of the MyDestination Funds® based on your
time horizon to an assumed retirement target that is on or near the age of 65. The general
characteristics of MyDestination Funds (Funds) are described below:
Investment Objective: To seek the highest total return over time
consistent with its asset mix. Total return includes capital appreciation and
income.
Risk and return characteristics: The Funds’ strategy is to pursue the
maximum amount of capital growth, consistent with a reasonable amount of
risk, during a shareholder’s pre-retirement and early retirement years, and to
adjust the Funds’ asset mix to increase exposure to investments in fixed-
income securities and short-term bonds during a shareholder’s later
retirement years and 15 years after the target retirement year.
Fees and expenses: For more information about the fees and expenses
of the Funds offered through GuideStone, you may obtain a copy of the
Prospectus by going to www.GuideStoneFunds.org or calling 1-888-98-GUIDE
(1-888-984-8433).
Right to alternative investment: Even if your deferrals are invested in the
default Fund, you have the continuing right to direct your deferrals into other
investment choices offered at any time. You are entitled to invest in any of the
investment choices without incurring a financial penalty.
Additional Information about the Plan
<<Option 1>>: Definition of Compensation upon which contributions are based.
<<Employer>> defines compensation as ____________________.
<<Employer>> provides a generous contribution to your account.
______________________________________________.
<<Option 2>> Please consult the Contribution section of the Plan Summary for
information on the definition of Compensation and Employer Contributions.
Making or changing your deferral election. You may make or change your deferral
election at any time by completing a new Salary Reduction Agreement form and giving it to your
Human Resources department. Please note the deferral changes will affect future deferrals.
Withdrawal and Vesting Provisions. You generally may not withdraw your elective
deferrals except when one of the following events occurs: severance from service with the
Employer, death, disability or attainment of age 59½. You are always 100% vested in your
elective deferrals. You are allowed to withdraw any rollover contributions you have made to
the Plan as well as after-tax contributions. Whether contributions transferred to the Plan are
distributable is based on your employment status with the employer from which the funds
were transferred.
You may be able to take out certain money if you have a hardship. Hardship distributions
are limited to the dollar amount of your contributions. Hardship distributions must be for a
specified reason – for qualifying medical expenses, costs of purchasing your principal
residence (or preventing eviction from or foreclosure on your principal residence, or
repairing qualifying damages to your principal residence), qualifying post-secondary
education expenses, or qualifying burial or funeral expenses. Before you can take a hardship
distribution, you must have taken other permitted withdrawals and loans from other plans of
the employer. If you take a hardship distribution, you may not contribute to the plan or
other qualifying company plans for six months.
You are eligible for a distribution of your employer contributions at severance from
employment <<and at age 59½>>.
<<Your employer contributions are 100% vested.>> <<Your employer contributions
are fully vested after ___ years. See schedule below: >>
<<Loans are permitted in the Plan.>>
For further information. Consult your Human Resources department, if you
have any questions regarding your rights and obligations under the Plan or if you
would like a copy of your Plan Summary at:
Address:
Telephone: The MyDestination Funds (Funds) attempt to achieve their objectives by investing in the GuideStone Select
Funds. The Funds are managed to a retirement date (target date) by adjusting the percentage of fixed income
securities and equity securities to become more conservative each year until reaching the retirement year and
then approximately 15 years thereafter. The target date in the name of the Funds is the approximate date when
an investor plans to start withdrawing money. By investing in the Funds you will also incur the expenses and
risks of the underlying Select Funds. The principal risks of the Funds will change depending on the asset mix of
the Select Funds in which they invest. You may directly invest in the Select Funds. The Funds’ value will go up
and down in response to changes in the share prices of the investments that they own. The amount invested in
the Fund is not guaranteed to increase, is not guaranteed against loss, nor is the amount of the original
investment guaranteed at the target date. It is possible to lose money by investing in the Funds.
ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGEMENT
403(b)(9) RETIREMENT PLAN
ANNUAL NOTIFICATION OF AUTOMATIC DEFERRAL
To: Participant
From: Employer
Date:
Unless you have previously completed a Salary Reduction Agreement form, under the terms
of the 403(b)(9) Retirement Plan (“Plan”), <<Employer >> automatically reduces your
Compensation by <<_____% or $_____>> as a <<tax-sheltered (pre-tax)>><<Roth
(after-tax)>> deferral.
You have the right to change your salary reduction amount at any time. The automatic
deferral percentage will remain in effect until you revoke or modify it by signing a Salary
Reduction Agreement form to defer more or less than the automatic deferral percentage
(including zero). Upon your request, <<the Employer>> will provide you a Salary Reduction
Agreement form.
The automatic deferral amount provided under the Plan may not adequately meet your
retirement needs. You can find out more information about how much you need to save for
your retirement by accessing your MyGuideStone account online at www.GuideStone.org, or
you may want to consult with your financial advisor on how to achieve your retirement
saving goal.
<<Optional>>In addition to the automatic deferral percentage described
above,<<Employer>> is implementing an annual deferral increase of <<_____% or
$_____)>> per year until your deferral <<percentage or amount>> reaches <<(_____% or
$_____)>> of your pay. You may opt out of the increase by completing a new Salary
Reduction Agreement form and giving it to your Human Resources department. If your
automatic enrollment began 90 days before your first scheduled increase date, your
automatic increases will not begin until the next scheduled increase date.
<<Optional>>Limited right to withdrawal automatic deferrals. For a limited time,
you may elect to have the Plan distribute to you all of your prior automatic deferrals and
allocable earnings on the deferrals. You may make this election on the refund authorization
form the Plan Administrator will provide to you upon request. You must make this election
no later than 90 days after the first automatic deferral is taken from your Compensation. If
you elect to withdraw all of your prior automatic deferrals, you will pay income tax on the
distributed amount, but you will not be subject to the 10% premature distribution penalty
tax, even if you received the distribution prior to age 59½. <<If you elect to withdraw your
prior automatic deferrals, you will forfeit any matching employer contributions related to
those deferrals, if applicable.>>
Right to direct investment/default investment. You have the right to direct the
investment of your elective and non-elective deferrals in any of the investment choices
offered by the Plan. If you do not make an election as to how the Plan should invest your
elective deferrals, then the deferrals will be invested in one of the MyDestination Funds® based
on your time horizon to an assumed retirement target that is on or near age 65. Details about
MyDestination Funds (Funds) include:
Investment Objective: To seek the highest total return over time
consistent with its asset mix. Total return included capital appreciation and
income.
Risk and return characteristics: The Funds’ strategy is to pursue the
maximum amount of capital growth, consistent with a reasonable amount of
risk, during a shareholder’s pre-retirement and early retirement years, and to
adjust the Funds’ asset mix to increase exposure to investments in fixed-
income securities and short-term bonds during a shareholder’s later
retirement years and fifteen years after the target retirement year.
Fees and expenses: For more information about the fees and expenses
of the Funds offered through GuideStone, you may obtain a copy of the
Prospectus by going to www.GuideStoneFunds.org or calling 1-888-98-
GUIDE (1-888-984-8433).
Right to alternative investment: Even if your deferrals are invested in
the default Fund, you have the continuing right to direct your deferrals into
other investment choices offered at any time. You are entitled to invest in
any of the investment choices without incurring a financial penalty.
Additional Information about the Plan
<<Option 1>>: Definition of Compensation upon which contributions are based.
<<Employer>> defines compensation as ____________________.
<<Employer>> provides a generous contribution to your account.
______________________________________________.
<<Option 2>> Please consult the Contribution section of the Plan Summary for
information on the definition of Compensation and Employer Contributions.
Making or changing your deferral election. You may make or change your deferral
election at any time by completing a new Salary Reduction Agreement form and giving it to your
Human Resources department. Please note the deferral changes will affect future deferrals.
Withdrawal and Vesting Provisions. You generally may not withdraw your elective
deferrals except when one of the following events occurs: severance from service with the
Employer, death, disability or attainment of age 59½. You are always 100% vested in your
elective deferrals. You are allowed to withdraw any rollover contributions you have made to
the Plan as well as after-tax contributions. Whether contributions transferred to the Plan are
distributable is based on your employment status with the employer from which the funds
were transferred.
You may be able to take out certain money if you have a hardship. Hardship
distributions are limited to the dollar amount of your contributions. Hardship distributions
must be for a specified reason - for qualifying medical expenses, costs of purchasing your
principal residence (or preventing eviction from or foreclosure on your principal residence,
or repairing qualifying damages to your principal residence), qualifying post-secondary
education expenses, or qualifying burial or funeral expenses. Before you can take a hardship
distribution, you must have taken other permitted withdrawals and loans from other plans of
the employer. If you take a hardship distribution, you may not contribute to the plan or
other qualifying company plans for six months.
You are eligible for a distribution of your employer contributions at severance from
employment <<and at age 59½>>.
<<Your employer contributions are 100% vested.>> <<Your employer contributions
are fully vested after ___ years. See schedule below: >>
<<Loans are permitted in the Plan.>>
For further information. Consult your Human Resources department, if you have any
questions regarding your rights and obligations under the Plan or you would like a copy of
your Plan Summary at:
Address:
Telephone: The MyDestination Funds (Funds) attempt to achieve their objectives by investing in the GuideStone Select Funds. The Funds are managed to a retirement date (target date) by adjusting the percentage of fixed income securities and equity securities to become more conservative each year until reaching the retirement year and
then approximately 15 years thereafter. The target date in the name of the Funds is the approximate date when an investor plans to start withdrawing money. By investing in the Funds you will also incur the expenses and risks of the underlying Select Funds. The principal risks of the Funds will change depending on the asset mix of the Select Funds in which they invest. You may directly invest in the Select Funds. The Funds’ value will go up and down in response to changes in the share prices of the investments that they own. The amount invested in the Fund is not guaranteed to increase, is not guaranteed against loss, nor is the amount of the original investment guaranteed at the target date. It is possible to lose money by investing in the Funds.