"Automatic" 401K enrollment & deductions

[BuelahWitch]

I started a temp job with a local gov't contractor a few weeks ago. It's not going to last very long. Got a letter from Fidelity today saying that starting on July 17 I will be automatically enrolled in the company's 401k, and they will take out 3% of my pay to put into this thing that I didn't authorize. Yes, I'm calling them tomorrow and telling them I am opting out, but I think this is total bullshit that this would happen at all.

[MohRokTah]

1. Ooh, they might invest in things you object to on religious grounds.

Might be a lawsuit there.

[BuelahWitch]

2. Hm, that's an idea

I'm a Smorgasbordian (a little Jesus loaf, some Buddha soup, and a bit of Tao cake, among other things), so there could be lots of things I object to.
Most of all I object to them taking money out of my check.

[TBF]

43. "Most of all I object to them taking money out of my check" -

coincidentally that is the thing they are most interested in doing. Capitalism is a lot of fun for the owners.

[mattclearing]

27. I think it's more like paying your Wall Street dues. n/t

[brooklynite]

80. Or, like every Fidelity account, they don't invest in anything...

...the money goes into a holding account, and you choose the funds you want to invest in.

[Demobrat]

3. Before you do that

Check and see if they're matching any of the money. If they are you could do well to leave it be. But check and make sure the money is in a stable value fund, AKA cash, if you don't want any stock market risk. Most plans give you that choice.

[BuelahWitch]

4. Nope, no match

They're too cheap.

[Demobrat]

5. Well it still can't hurt to save for retirement when you have the chance.

No match sucks though.

[quakerboy]

24. Actually, It really can

Its established that this is a short term job.

So they take the money, put it into this fund. In a short while the job is no more, and there surely will not be enough accumulated cash to sustain the investment. So they will forcibly cash it out, with penalties.

[Travis_0004]

29. or you roll it over into an IRA

No fees for that.

[DrDan]

31. no - the account can be rolled-over to an IRA - with another financial institution if

desired - or left in the 401K should the investment strategies make sense. It might be eligible to be transferred to a new employer's savings plan.

There are several options. The OP will not be forced into a penalty-situation.

[eallen]

64. And it stays tax sheltered when you roll it over into an IRA

All jobs are temporary. Retirement savings should outlast them all.

If you'll make enough money this year to be above the lowest tax bracket, I would consider allowing that deduction. Or even increasing it.

[abbeyco]

6. Lots of companies have moved to passive enrollment

It's been a trend since the early 2000s especially if a company is top-heavy with management who are chopped at their tax-free benefit.
Simply opt out of the plan and you should be good - not a huge thing to worry about.

[LibDemAlways]

7. My husband started with a new company

earlier this year and also received the 401K letter. Took him the better part of a morning to opt out. He was put on hold for thirty minutes, handed off several times, and then hung up on. When he did finally reach the right person, she read him a script urging him to change his mind. Opting out was a huge hassle, and there was no opportunity to simply go online and complete the process with a few keystrokes. It's infuriating.

[BuelahWitch]

8. I know they passed the law back in 2006

but this is the first time it has ever happened to me. I don't feel they have the right to take money I earned and put it in their 401k. I can make my own decisions. They just want to hold on to the money.
At least I wasn't asked to take out Dead Peasant Insurance...

[A HERETIC I AM]

11. Oh, for crying out loud

I don't feel they have the right to take money I earned and put it in their 401k.

It isn't "Their 401(k)". It's YOURS. But I understand your ire about not being given the choice.

They just want to hold on to the money.

The company isn't holding onto anything unless you are working for a large financial services firm and they are the custodian of their own 401(k)

[MiniMe]

14. Since the job isn't supposed to last long, I would definitely question being "automatically enrolled

Though it sounds like there are no matching funds, so you don't have to worry about vesting for that share.

The problem is that if this is a temporary job, it can be next to impossible to get the funds out, and then you usually have to pay a penalty if you aren't 59 1/2.

[A HERETIC I AM]

15. 401(k)'s are portable.

When the OP leaves the firm, they can easily (OK...it takes a bit of effort, but it isn't difficult) move these funds to a new 401(k) at their next job with no penalty whatsoever and no fees. They could also roll it to an IRA if they desired.

The OP also said it was 3% of their gross. That's peanuts and I find it hard to believe 3 bucks per hundred would really be missed. Not to mention it reduces the Adjusted Gross Income and therefore reduces the tax burden.

There has been an awful lot of lamenting the 401(k) system on DU and some of it is justified. But misinformation helps no one. And if you have a chance to save a bit in a way that is basically painless, why not do it, regardless for how long it is?

[BuelahWitch]

21. Painless for you, maybe

Not for everyone. What "misinformation" have I given, pray tell?
I love how the muddle class thinks that everyone can easily save money for retirement. Some of us can't. The little bit they would take would quickly be eaten up by fees, and I'd be out that money. It just ain't worth it, and it's still bullshit that I have to be proactive and tell them to leave my money alone!

[A HERETIC I AM]

50. So....the difference between $100 and $97 is a deal breaker for you? Is that it?

What "misinformation" have I given, pray tell?

I already answered, re your post above, but I'll reiterate. You said;

I don't feel they have the right to take money I earned and put it in their 401k.

That. That right there is misinformation. Or perhaps it would be better if I said it demonstrates you are misinformed or laboring under a misapprehension. It isn't THEIR 401(k). It is yours.

I can make my own decisions.

And absolutely no one is stopping you from doing so. A poster above mentioned how hard it was for her husband to opt out of his company's plan. If you have that much trouble I would be surprised, but even if you do, you will still have opted out by the time you're done.

They just want to hold on to the money.

"They" aren't holding onto anything. At all. Zip, zero, nada, bupkiss. More misinformation.

At least I wasn't asked to take out Dead Peasant Insurance...

Then consider yourself lucky, I suppose.

I love how the muddle class thinks that everyone can easily save money for retirement. Some of us can't.

Can't? Or won't? Look, I understand your point of view, trust me. You and many millions of Americans feel the same way. I get it. Fine. Opt out then. There is a reason they automatically enroll you and that reason was addressed downthread.

The little bit they would take would quickly be eaten up by fees, and I'd be out that money.

More misinformation. If your balance was only $10, do you really think it would just disappear due to fees? If so, it is clear you do not understand how those fees are charged and/or have little understanding of how a Mutual Fund works.

But...again, opt out. You can and if you feel that strongly, you should.

And before I get the typical DU response suggesting I am somehow independently wealthy or some sort of "Shill" for the financial industry merely because I am trying to present facts instead of hysterics, know this - I am a truck driver. I WAS a stock broker for 3 years during the crisis. I am no longer a broker because my timing entering the business could not have been worse. I am by no means rich or well off and I will likely have to work until I drop dead. But I know what I know, and this subject is important to people. It does a major disservice to anyone who has a 401(k) to post falsehoods and bad information.

[BuelahWitch]

58. So you worked for the Wall Street Casino?

What a surprise!
Now run off and have yourself a cup of $20 coffee like a good little stock broker.

[A HERETIC I AM]

61. See? Right there. That bullshit response is exactly what I expected.

I told you I am a truck driver. I've never had a twenty dollar cup of coffee in my life and never will. I worked as a retail broker for 3 years dealing with clients of average means. My first client was a woman who worked in a factory all her life and managed to save about $300,000 over the course of 40 years.

I have been an Over-The-Road truck driver my entire adult life. In 2006 I tried a career change to better myself. It was a failure. I'm now back in trucking and have been since late 2010 after having been unemployed for over a year after I was let go by the firm I worked for......IN FORT MYERS, FLORIDA, a hundred light years from Wall Street.

I am merely trying to provide accurate information. You on the other hand feel a completely snarky, insulting and uncalled for response was in order.

Do as you see fit. All the best.

[BuelahWitch]

73. I give back what I get

You were a jerk from your first response to me. I still think Wall Street is a casino. People who "invest" usually don't have to worry about having money to pay the light bill. Some day you might and then will know what I'm talking about.

[Nuclear Unicorn]

33. Everything you say is true; however, on principle I would argue against compulsory association.

Yes, it's easy to disassociate but why should anyone have to exert any effort to not be a apart of something they never wanted to be a part of in the first place. One could just as easily argue its no great burden for the company to ask first.

[A HERETIC I AM]

54. As Skittles said in post #19 below....

They tried it and it didn't work. Too many Americans these days, myself included - I am by no means a savings account poster boy - do not save money like our grandparents or even our parents did. It matters. If you are automatically enrolled you don't see the money going out, so to speak. You don't have to write a check or do a transfer. It is already done. If people weren't automatically enrolled a large percentage would never enroll. The government wants to encourage long term/retirement savings to ease the stress on the SS System and to ensure (or at least attempt to) that people aren't thrown into poverty when they can no longer work.

[Nuclear Unicorn]

60. It's hard to argue with you when everything you say is true.

SO STOP BEING RIGHT ALL THE TIME!!!

Just kidding. You keep on keepin' on.

Still, you're rightness still makes me hesitant. I don't want companies running around acting in what THEY perceive to be my best interest. It's not that you're wrong about the lack of savings, it's just that the company can never be right about what I need.

[Lurker Deluxe]

66. You have to opt out of many things

If you start with a company and don't want health/vision/dental ... you have to opt out, the default is you get those things.

Most companies have some sort of match, so the default option is to begin your 401K after you become eligible and set the contribution at the rate that will qualify for the match. To think that a company if trying to give you free money is somehow underhanded by them is a stretch.

It is amazing how many people opt out of these programs because of false information.

When I started with this company, in 2005, we went through the orientation and the 401K was explained along with all of our other benefits. There were like 7 of us in the orientation and two opted out, one of those people still works here. The annual 401K meeting is widely attended and after the meeting we tend to stand around and talk about what we are doing with our money and that one guy always tells us how stupid we are for "falling for the Wall Street shell game" and that we will lose all of our money. Ten years later my 401K is performing well and will help to provide for my retirement ... he has zilch, and tells me I am the fool.

Just crazy.

[quakerboy]

25. Are you sure about that?

some years back, my wife had a 401k that she fed into for a couple years. The company laid her off, and then we got a letter saying that they had reclaimed the matching funds and would be sending her a check for the remainder, since it was not a large enough amount to continue without continual deposits. That didn't leave me the impression that it was really hers.

[Travis_0004]

30. her contributions are 100 hers

A companies matching contribution may not belong to her until she has workes for a certain length of time.

[DrDan]

34. employer contributions may or may not be "yours" based on the vesting requirments

Annually, part of that contribution becomes vested, and hence your money.

The yearly vesting requirements vary by plan.

[DrDan]

39. oops - meant employer contributions - will change it

[A HERETIC I AM]

40. Fair enough. n/t

[A HERETIC I AM]

38. Yes I am quite sure.

I'm on the road right now, but taking a rest break that is almost done. I don't have time to go into more detail, but you have the answers in other posts. Suffice to say, the money the company contributes (the "match&quot can be clawed back by the firm if the vesting time schedule has not been met.

[mythology]

9. Most people go with the default option

So it's far better that the company would take money for the 401k unless you opt out rather than making people opt in. It makes it so that people will save something for retirement.

[vadermike]

10. 401k

401(k)'s can help you out quite a bit in the future.. even if you just put small amounts in every month.. you can definitely choose what you want to put it in.. even with no match.. it makes your pre-tax base smaller , so you get a break on the amount of funds you put in.. plus you can build a nest egg for the future.. just my .02.. 401(k) can be a nice supplement to SSI and Medicare for when we retire (someday hopefully).. it is always good to have a little extra.. even if you can put in 3-4 percent... it really does add up..

[BuelahWitch]

12. I understand that. I would still like to make my own decision

That business is not my Daddy.

[LibDemAlways]

13. No one shoud be put in the position of having

to opt out. A new employee should only be given the choice to opt in. I'm with you. It's your after tax money. You should have the freedom to decide what to do with it.

[A HERETIC I AM]

16. No, it's not.

It isn't "After tax money". It is PRE TAX dollars that are put in the plan and therefore reduce the tax burden at the end of the year.

[LibDemAlways]

17. I stand corrected. I have nothing against

putting money into a 401K. What i don't appreciate is being auomatically enrolled unless I go to the trouble of opting out, and some of these outfits make opting out unnecessarily difficult. Other employee benefits require that the employee opt in. A 401K should be no different.

[Skittles]

19. they tried that and it did not work

there will be wave after wave of people retiring and falling into poverty because they failed to save any money - this is seen a way to get people more involved in saving money

[PoliticAverse]

26. Indeed, the US Department of Labor even encourages automatic enrollment plans...

See: http://www.dol.gov/ebsa/publications/automaticenrollment401kplans.html

[Skittles]

28. they could be taking cues from Australia

http://www.nextavenue.org/blog/solve-us-retirement-crisis-look-australia

[Gormy Cuss]

47. Automatic enrollment isn't designed to benefit people who aren't saving for retirement.

That's a side effect. While it's nearly always a good idea to take advantage of the tax deferred benefits of a 401K, the reason automatic enrollments became popular is that it allows companies to meet the required ratio of contributions made by "highly compensated employees" (HCEs) to those made by employees earning less.

Highly compensated employees aren't trading off paying for the rent vs. saving for retirement and are more inclined to set aside the full amount allowed by law and lower their current tax obligation. If an insufficient number of low and mid-range earners contribute, the HCEs will not be able to contribute the maximum amounts.

Thus automatic enrollment is one way to increase the contributions for the non-HCEs in hopes of preserving the maximum 401K benefit for management and other highly paid workers.

The "save people from falling into poverty in retirement" is the sales pitch.

[Skittles]

69. I'm not an idiot

I know companies would not push it if it wasn't in their favor

[Gormy Cuss]

70. I don't believe that I called you an idiot.

However, you repeated the spin used by companies to sell this to employees just like others on this thread. No one had pointed out the business reason that companies pushed for automatic enrollment (at least no one had at the time I posted the reply.)

What would be better for NHCEs is coupling automatic enrollment with mandatory matching percentages and no vesting period. Somehow I doubt that automatic enrollment would be so popular with both of those stipulations.

[BuelahWitch]

74. Thank you! n/t

[Skittles]

18. BuelahWitch, find out what the company match is

if it's 3% or more, keep it

http://retireplan.about.com/od/401kplans/a/employer_match.htm

excerpt:

Don’t Turn Down Free Money
If you fail to contribute to your 401(k) plan up to the amount your employer matches, then you are turning down money your company would otherwise be providing for your retirement. It is hard to imagine a scenario when turning down free money is a good idea. Be sure to take advantage!

[BuelahWitch]

20. There is no company match

No free money.

[DrDan]

22. why all the outrage? This is not uncommon - simply opt-out.

Many companies do this because 401Ks are a wise way to invest for retirement.

If retirement is not a priority of yours, simply maintain your cool and make a call or, better yet, do it in writing.

I assume you are aware of the tax advantages of a 401K . . . and that your tax-deferred savings can be transferred to another financial institution . . . either after you leave this company or while still employed.

[BuelahWitch]

42. This is DU, it runs on outrage n/t

[DrDan]

53. well . . . you have a good point there

where would we all be without a daily dose of DU-outrage

[lostincalifornia]

52. Yes many companies do that, but a lot of companies do not. They should NOT automatically enroll you

into a voluntary plan unless you explicitly authorize them to. I am surprised it is even legal. 401Ks are voluntary period

[DrDan]

56. I really have no problem with it . . .

we are a nation of spenders . . . encouraged by each level of government. Our economy is based on spending.

We should be a nation of savers, instead. Anything we can do to encourage saving will help our economy long-term.

Auto-enrollment in 401K's/403B's etc is a move in the right direction as far as I am concerned.

[BuelahWitch]

57. I was surprised it was legal too

I had never heard of "The Pension Protection Act":
http://www.pensionrights.org/issues/legislation/automatic-enrollment-401ks

If this were a long term gig it would be different, but whatever they would take out for this 6 week job would be sucked up by fees. I'm sure that this has nothing to do with their concern for my future retirement, they're likely getting some sort of kickback from it.

[madville]

23. My employer

My employer makes me pay about 1% of my pay towards the small pension program, I'm not aware of any way to opt out. They also match up to 5% of my gross income in the investment plan, it's voluntary and one has to opt in though.

I hope when I turn 62 I can have about $4000-5000 of monthly income between the pension, savings plan, and early social security, that's the plan anyway, anything can happen though.

[badtoworse]

46. 5% is a nice match.

[madville]

65. The match was put tree when the pension was reduced

It's not terrible, people usually retire with say a $1500 a month pension and $300,000-$500,000 in their saving plan, then they select how they want to draw it out and how often after age 57 and officially retiring. So it's pretty standard to retire on around $3,000 a month just from those two sources, not counting any potential social security at 62-67.

[badtoworse]

32. Is there an employer match? Don't opt out until you know.

If your employer is matching all or some of your contributions, he's giving you free money. You would be foolish to opt out.

[DrDan]

35. apparently there is no match, per posts above, however, there are still tax advantages

to consider.

Opting-out should still be thought out rationally.

[badtoworse]

44. You don't need to sell me on 401k's. I'm a big believer

Even with no match, if the money gets deposited before you get you check, it becomes a bit of a nuisance to take it out and spend it prematurely. Retirement savings is something everyone should do.

[HockeyMom]

36. You have to sign a statement officially opting out

otherwise you will automatically be enrolled. That is how this works. I have always had to do this, includidng for 403B. They just assume you want it, unless you tell them you don't.

[BuelahWitch]

41. Never had to do this

Not in 35 years of working. That's why I'm pissed.

[badtoworse]

45. Just out curiosity, how are you set up for retirement?

If you've been working 35 years, I'd say you're in your 50's and hopefully, you've accumulated some sort of a nestegg to retire on. Adding to it certainly can't hurt.

[tech3149]

48. I know how much this sucks

The idea of automatic contribution is bad enough, but Fidelity? I've had IRA's AND 401k'S managed by a number of different financial institutions and Fidelity was the worst as far as the cost's and fees.
Since it's not likely to be a long term job, just go with it and move the contributions as soon as possible.
I ended up moving my money to a religious based investment company. My parents had been there for years and did very well. I live in a modest fashion and the real selling point on their plan was that I would get a consistent monthly payout for the rest of my life, I don't plan to live forever or even as long as my parents, but I can also draw out funds without penalty in emergencies. It just cuts my monthly disbursement.

[cbdo2007]

49. Yeah, too bad you don't have a pension (lol)

Geez, everyone complains that we don't have pensions anymore and now only have 401K, then they basically treat the 401K like a pension by forcing you to participate, and people still get mad. Lol.

[BuelahWitch]

59. Actually I do have a pension

From an old job, which I can collect from in a few years.
Sounds like you need a cup of $20 coffee too...

[Lurker Deluxe]

67. Hope it remains fully funded

And doesn't get downsized.

[BuelahWitch]

75. Frankly, I don't know that I'll live to see any of it

My family doesn't have much longevity on either side. But that's ok.

[lostincalifornia]

51. A lot of companies do that, and it is not right. I am surprised that practice is legal. Yes, you

need to call them

[BuelahWitch]

55. I did, first thing this morning.

The person on the phone said that they will respect my wishes, but I will be watching and documenting.

[Xyzse]

62. Actually, the reason they do "Automatic" nowadays is because a lot of people that could benefit from

This, don't sign up, forget to, or miss the deadline dates.

That money though remains yours and can be rolled over to any job you end up with.
They also do employer matching funds for that, so you get more money in the end.

Thing is, the reason they started doing automatical enrollment is because people don't understand the need for it.
It is also their method of doing away with the pension plan(sadly).

Any how, I don't remember, but I thought companies were asked to automatically do that.
Though, it seems you said they don't do employer match...

I guess you can definitely opt out.
I've opted out mine, since I tend to invest elsewhere.
401Ks were never supposed to be the sole retirement investment. It was supposedly only supplementary, and many times it is crooked as sh1t.

[FSogol]

63. Translation: Saving for retirement sucks because I need to buy some Big Gulps and Chalupas today.

[BuelahWitch]

72. No, translation: thirty dollars a paycheck buys me gas for my old car and some groceries

But I guess a rich dude like you in N. VA wouldn't understand about that.
Why do so many people on DU hate the poor?

[FSogol]

76. $30 a paycheck just might save your ass when you get old. It also reduces your tax burden.

If you look at the past in the US, people used to save for the future. They had saving accounts and retirement accounts. They saved up for what they wanted instead of borrowing for what they wanted.

How is encouraging someone with a job to save for the future, hating the poor?

[BuelahWitch]

78. Apples and oranges

This thread was about my *temporary* (six week gig) employer taking money out of my check without my permission for a 401k that I never asked for, you're totally making it into something else. I guess people who are comfortably middle class can't wrap their head around the fact that the money does me more good by putting gas in my car than in some sort of an account that a. I probably won't live to withdraw from and b. if I take out of now gets 20% sucked away from taxes (not to mention fees).
But just keep acting superior and telling me I should be like grandma and save my money.

[lumberjack_jeff]

77. Agree. n/t

[magical thyme]

68. been there. at my call center job, I had to opt out of an automatic 401k

Then, 6 months later, the company announced we were getting bonuses. Yeah! I was going to get $100 extra, which I desperately needed as I'd been living hand to mouth for some time now.

Only instead of giving us the cash, they went ahead an opened a 401K against my express, written instructions, and deposited the money in the most fee-intensive offering there.

When I quit that job, I couldn't cash that thing out fast enough. Of course, thanks to the fees, taxes and penalties, my $100 was now closer to $75 or so. Assholes. And they wonder why they can't keep anybody there...

[BuelahWitch]

71. That's terrible

Yeah, people in this thread don't understand how it is when you're not a "professional" or working temp, which alot of us are. I know the company I work for was not doing that out of the goodness of their heart. They got something out of it.

[BuelahWitch]

79. Thanks to those who were nice to me even if you disagreed with my post

No one should be told that they have to opt out of having money they've earned taken out of their check for something that should be voluntary. It's not a tax, it's a fucking 401k.

And now I'm fucking done with this thread.