Tom Breitenbach
Just before Christmas and in the last hours of the 2014 assembly, the Ohio legislature quietly passed, and Governor Kasich signed into law, a provision enabling non-governmental employers to amend their 401(k) or 403(b) plans to provide for automatic enrollment and withholding of employee wages. What’s the big deal, since ERISA now expressly permits automatic enrollment and preempts state wage withholding laws like ORC Section 4113.15 which requires employee written consent before deducting their wages for most purposes including retirement contributions? Vanguard announced that 34% of its client plans had adopted automatic enrollment by 2014. Companies like McDonald’s implemented auto enrollment plans since the mid-1980s, so why pass this state legislation?
Because plans which are NOT subject to ERISA and its state law preemption rules were still beholden to Ohio’s state wage withholding requirements and could therefore make 401(k) employee contributions only for those employees who complete a salary reduction contribution agreement. Church plans are generally exempt from ERISA, but are subject to state laws.
This new Ohio law is great news for non-electing church plans and their employers who genuinely want to help their employees secure healthier retirement savings. Church plans are finally able to be on a par with all other plans that have implemented automatic enrollment for many years. It’s about time!
