Payroll, Here Are Your Articles for Wednesday, November 10, 2021
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Active vs. Passive Benefits Enrollment


Benefits enrollment is normally done at the time of hire and then during open enrollment — it can be conducted actively or passively.

What is active enrollment?

Active enrollment requires employees to review their existing benefit choices and make the necessary changes. For example, they can change their 401(k) contribution amount or change their health insurance coverage from employee-only to family. They can also decline certain benefits.

The HR department takes an active role in the process, including deploying engagement strategies to ensure employees do not miss open enrollment. Employees who miss open enrollment risk losing some or all of their benefits. They will, for example, lose their health coverage, unless they experience a qualifying life event, such as having a baby or getting married.

On the upside, active enrollment helps employers keep employees informed about their benefits and allows employees to reassess their choices. In addition, employees may be less likely to question paycheck deductions stemming from changes they made during active enrollment — because they made those changes.

On the downside, active enrollment can be time-consuming for HR professionals and employees, especially those in smaller businesses with limited resources.

Employers can simplify active enrollment by utilizing HR technology that comes with online benefits enrollment.

What is passive enrollment?

Passive enrollment means that the employees' current benefit elections are automatically rolled over into the next benefits period. No action is needed on the employees' part. This is a convenient, and often effective, way for employers to maintain benefits participation levels.

Passive enrollment is less stressful for HR professionals, as they don't have to worry about employees missing open enrollment. There are no angry employees unfairly blaming HR because they missed open enrollment and consequently lost benefits coverage. There's also less paperwork since benefit elections are less likely to be adjusted.

However, passive enrollment has its disadvantages, including employees potentially ending up with benefits that do not reflect their current needs. Employees may become apathetic about their benefits, choosing to "go with the flow" rather than having a vested interest in the program.

Further, employees might not appreciate automatic renewals, especially for benefits associated with payroll deductions. So before you opt for passive enrollment, you may want to find out how your employees feel about it.

Benefits that do not require employee contributions (such as benefits funded 100% by the employer) may fare better with passive treatment than will those requiring payroll deductions (like health insurance and retirement plans).

Which is more popular?

A 2011 survey by SHRM found that 71% of employers conducted passive enrollment instead of active enrollment. However, more recent surveys show a shift toward active enrollment.

For instance, a 2019 survey by JP Griffin Group reveals that 50% of employers utilize passive enrollment. In that same survey, 52% of employees said they prefer active enrollment.

As noted by JP Griffin Group, "Most employers who implement a passive open enrollment do so for one simple reason — it's easier." But that doesn't necessarily mean it's the best choice for the organization.

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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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