Printer Friendly Version PDF Version
Do you want a retirement plan that provides a high
level of participation and makes it easy for you to withhold employee
contributions and select the investments for those contributions? Then
you may want to consider an automatic enrollment 401(k) plan.
Approximately one-third of eligible workers do not
participate in their employer’s 401(k) plan. Studies suggest that
automatic enrollment plans could reduce this rate to less than 10
percent, significantly increasing retirement savings. Whether you
already have a 401(k) plan or are considering starting one, automatic
enrollment 401(k) plans offer many advantages.
An automatic enrollment 401(k) plan:
|
|
-
Helps attract and keep talented employees.
-
Increases plan participation among both
rank-and-file employees and owner/managers.
-
Allows for salary deferrals into certain plan
investments if employees do not select their own investments.
-
Simplifies selection of investments appropriate
for long-term retirement savings for participants.
-
Helps employees to begin saving for their future.
-
Offers significant tax advantages (including
deduction of employer contributions and deferred taxation on
contributions and earnings until distribution).
-
Permits distributions to employees who opt out of
participation in the plan within the first 90 days.
This booklet provides an overview of automatic
enrollment 401(k) plans. For more information, resources for you and
your employees are listed at the end of this booklet.
When you establish an automatic enrollment 401(k)
plan you must take certain basic actions. One of your first decisions
will be whether to set up the plan yourself or to consult a professional
or financial institution – such as a bank, mutual fund provider, or
insurance company – for help with establishing and maintaining the
plan. In addition, there are four initial steps for setting up a
tax-advantaged automatic enrollment 401(k) plan:
-
Adopt a written plan document
-
Arrange a trust fund for the plan’s assets
-
Develop a recordkeeping system
-
Provide plan information to employees eligible to
participate
Adopt a written plan – Plans begin with a written
document that serves as the foundation for day-to-day plan operations.
If you have hired someone to help with your plan, that person likely
will provide it. If not, consider obtaining assistance from a financial
institution or retirement plan professional. In either case, you will be
bound by the terms of the plan document. Before adopting a plan
document, you will need to decide on the type of automatic enrollment
401(k) plan that is best for you.
A basic automatic enrollment 401(k) plan must state
that employees will be automatically enrolled in the plan unless they
elect otherwise and must specify the percentage of an employee's wages
that will be automatically deducted from each paycheck for contribution
to the plan. The document must also explain that employees have the
right to elect not to have salary deferrals withheld or to elect a
different percentage to be withheld.
An eligible automatic contribution arrangement (EACA)
is similar to the basic automatic enrollment plan but has specific
notice requirements. In addition, when the participant does not provide
direction, the employee salary deferrals must be invested in certain
default investments (see Investing the Contributions). An EACA can allow
automatically enrolled participants to withdraw their contributions
during the first 90 days.
A qualified automatic contribution arrangement (QACA)
is a type of automatic enrollment 401(k) plan that automatically passes
certain kinds of annual IRS testing. The plan must include certain
required features, such as automatic employee contributions (including
annual increases), employer contributions, a special vesting schedule,
and specific notice requirements.
While this booklet focuses on automatic enrollment
401(k) plans, the automatic enrollment feature can be used in 403(b) and
457(b) plans.
Arrange a trust fund for the plan’s assets –
A
plan’s assets must be held in trust to assure that they are used
solely to benefit the participants and their beneficiaries. The trust
must have at least one trustee to handle contributions, plan
investments, and distributions. Since the financial integrity of the
plan depends on the trustee, selecting a trustee is one of the most
important decisions you will make in establishing an automatic
enrollment 401(k) plan.
Develop a recordkeeping system – An accurate
recordkeeping system will track and properly attribute contributions,
earnings and losses, plan investments, expenses, and benefit
distributions. It will also provide a record of employees who elect not
to participate as well as participant contribution and investment
decisions. If a contract administrator or financial institution assists
in managing the plan, that entity typically will help keep the required
records. In addition, a recordkeeping system will help you, your plan
administrator, or financial provider prepare the plan’s annual
return/report that must be filed with the Federal government.
Provide plan information to employees eligible to
participate – You must notify employees who are eligible to participate
in the plan about certain benefits, rights, and features under the plan.
Employees must receive an initial notice prior to automatic enrollment
in the plan and receive a similar notice each year.
In addition, a summary plan description (SPD) must be
provided to all participants. The SPD is a more comprehensive document
that informs participants and beneficiaries about the plan and how it
operates. The SPD typically is created with the plan document. (For more
information on the required contents of the SPD, see Disclosing Plan
Information to Participants) You also may want to provide your
employees with information that discusses the advantages of your
automatic enrollment 401(k) plan. The benefits to employees – such as
pre-tax contributions to a 401(k) plan, employer contributions and
compounded tax-deferred earnings – help highlight the advantages of
participating in the plan.
Once you have established a plan, you assume certain
responsibilities in operating the plan. If you hired someone to help in
setting up your plan, that arrangement also may have included help in
operating the plan. If not, another important decision will be whether
to manage the plan yourself or to hire a professional or financial
institution — such as a bank, mutual fund provider, or insurance
company — to take care of some or most aspects of operating the plan.
Elements of operating automatic enrollment 401(k) plans include the
following:
-
Participation
-
Contributions
-
Vesting
-
Nondiscrimination
-
Investing the contributions
-
Fiduciary responsibilities
-
Disclosing plan information to
participants
-
Reporting to government agencies
-
Distributing plan benefits
Employees are automatically enrolled in the plan and
a specific percentage will be deducted from each participant’s salary
unless the participant opts out or chooses a different percentage.
Typically, a plan includes a mix of rank-and-file employees and
owner/managers.
However, as with any 401(k) plan, some employees may
be excluded if they:
-
Have not attained age 21;
-
Have not completed a year of
service; or
-
Are covered by a collective
bargaining agreement that does not provide for participation in the
plan, if retirement benefits were the subject of good faith bargaining.
Employees cannot be excluded from a plan merely
because they are older workers.
Basic and Eligible Automatic Enrollment 401(k) Plans
-
As with any 401(k) plan, in addition to employee
contributions, you decide on your business’ contribution (if any) to
participants’ accounts in your plan. If you decide to make
contributions to your automatic enrollment 401(k) plan for your
employees, you have additional options. You can match the amount your
employees decide to contribute (within the limits of the law) or you can
contribute a percentage of each employee’s compensation (called a
nonelective contribution) or you can do both. You have the flexibility
of changing the amount of matching and nonelective contributions each
year, according to business conditions.
Qualified Automatic Contribution Arrangements (QACAs)
-
If a plan is set up as a QACA with certain minimum
levels of employee and employer contributions, it is exempt from the
annual IRS testing requirement that a traditional 401(k) plan must
perform. The initial automatic employee contribution must be at least 3
percent of compensation. Contributions may have to automatically
increase so that, by the fifth year, the automatic employee contribution
is at least 6 percent of compensation.
The automatic employee contributions cannot exceed 10
percent of compensation in any year. The employee is permitted to change
the amount of his or her employee contributions or choose not to
contribute but must do so by making an affirmative election.
The employer must make at least either:
-
A matching contribution of 100 percent for salary
deferrals up to 1 percent of compensation and a 50 percent match for all
salary deferrals above 1 percent but no more than 6 percent of
compensation; or
-
A nonelective contribution of 3 percent of
compensation to all participants
In a QACA, the employer may make an additional
contribution to each employee’s account and have the flexibility to
change the amount of these additional contributions each year, according
to business conditions.
Contribution Limits -
Employer and employee contributions to an automatic
enrollment 401(k) plan are subject to an overall annual limitation for
each employee. Employer and employee contributions and forfeitures (nonvested
employer contributions of terminated participants) may not exceed the
lesser of:
Employees can make salary deferrals of up to $16,500
for 2009. This includes both pre-tax employee salary deferrals and
after-tax designated Roth contributions (if permitted under the plan).
Like any other 401(k) plan, an automatic enrollment
401(k) plan can allow catch-up contributions of $5,000 (for 2008) for
employees aged 50 and over.
Vesting -
Automatic employee contributions, like all salary
deferrals, are immediately 100 percent vested — that is, the money
that an employee has contributed to the plan cannot be forfeited. When
an employee leaves employment, he/she is entitled to those deferrals,
plus any investment gains (or minus losses) on his/her deferrals.
Employer contributions are vested according to the
plan’s vesting schedule. However, the required employer contributions
under a QACA must be fully vested by the time an employee has completed
two years of service.
Nondiscrimination -
In order to preserve the tax benefits of a 401(k)
plan, the plan must provide benefits for rank-and-file employees, not
just business owners and managers. These requirements are called
nondiscrimination rules and compare plan participation and contributions
of rank-and-file employees to owners/managers.
Basic automatic enrollment 401(k) plans and most
EACAs are subject to annual testing to assure that the amount of
contributions made on behalf of rank-and-file employees is proportional
to contributions made on behalf of owners and managers. Keep in mind,
automatic enrollment increases participation, thereby making it more
likely that a plan will pass the test. Automatic enrollment 401(k) plans
set up as QACAs are not subject to this annual testing.
Investing the Contributions -
Employers interested in automatically enrolling
employees in a 401(k) plan previously worried about potential liability
for losses resulting from their investment choices when participants did
not provide direction. They were also concerned about deducting
employees’ contributions from their paychecks without prior approval.
The good news is that changes in the law address both issues and make
automatic enrollment 401(k) plans an attractive option.
Now you can automatically invest employee
contributions in certain default investments that generally offer high
rates of return over the long term and provide a greater opportunity for
employees to save enough money to take them through retirement. If
carried out properly, you can limit your liability as plan fiduciary for
any automatic enrollment 401(k) plan losses that are a result of
investing participants’ contributions in these default investments.
Note that you still are responsible for prudently selecting and closely
monitoring these default investments. (see Fiduciary Responsibilities
for more information)
There are conditions to obtain this relief from
liability:
-
Plan sponsors place the participant’s
contributions in certain types of investments (discussed below).
-
Before his or her first contribution is deposited,
the participant receives a notice describing the automatic enrollment
process (discussed below); a similar notice is sent annually thereafter.
-
The participant does not provide investment
direction.
-
The plan passes along to the participant material
related to the investment, such as prospectuses.
-
The participant is given the opportunity
periodically to direct his or her investments from the default
investment to a broad range of other options.
Qualified Default Investment Alternatives -
As noted in the first condition listed above, there
are certain criteria for the default investments. You can choose from
four types of investment alternatives for employees’ automatic
contributions, called qualified default investment alternatives, or
QDIAs. Three alternatives are diversified to minimize the risk of large
losses and provide long-term growth. They are:
-
A product with an investment mix that changes asset
allocation and risk based on the employee’s age, projected retirement
date, or life expectancy (for example, a lifecycle fund);
-
A product with an investment mix that takes into
account a group of employees as a whole (for example, a balanced fund);
and
-
An investment management service that spreads
contributions among plan options to provide an asset mix that takes into
account the individual’s age, projected retirement date, or life
expectancy (for example, a professionally managed account).
These alternatives can include products offered
through variable annuity contracts and other pooled investment funds.
There is an alternative that allows plans to invest
in capital preservation products, such as money market or stable value
funds, but only for the first 120 days after the participant’s first
automatic contribution. This option can be used only in EACAs that
permit employees to withdraw their automatic contributions and earnings
within 90 days after the participant’s first automatic contribution.
Before the end of the 120-day period, if you receive no direction, you
must redirect the participant’s contributions in the capital
preservation product to one of the long-term investments mentioned
above.
When selecting products to use as default
investments, remember that they generally cannot hold employer
securities (such as employer stock).
Note that you do not have to select a QDIA for your
plan. You may find that other default investment alternatives would be
more appropriate for your employees.
Notifying the Employees -
Under another condition for the liability relief, you
must provide employees notice in advance of the first investment of
automatic employee contributions and annually thereafter, so they can
make informed decisions regarding participating and investing in the
plan. For information on the timeframes for providing the notices, see Disclosing Plan Information to Participants.
The notice should include information about the
automatic contribution process, including the opportunity to elect out
of the plan. In addition, the notice must describe the default
investment the plan is using, the participants’ right to change
investments, and where to obtain information about other investments
offered by the plan. To help in preparing your notice, a sample notice
is available on both the DOL and IRS Web sites under “Pension
Protection Act.”
If the participant, after receiving the initial or
annual notice, does not provide investment direction, the participant is
considered to have decided to remain in a default investment.
Transferring or Withdrawing Investments from a
Default Investment -
Employees may not want to participate in the company
retirement plan, or they may decide to direct their plan investments
themselves rather than have their contributions invested on their
behalf. If you want to allow participants to withdraw their
contributions within 90 days of the first contribution, your plan
document must provide for it and be set up as an EACA. Participants
whose contributions are automatically deposited in the default
investment must be allowed to change their investments to other
available plan options as frequently as participants who actively chose
the default investment, and at least once every quarter.
If an employee decides to withdraw investments within
90 days of the first contribution or to change investments, a plan
cannot impose restrictions, fees, or expenses beyond standard fees for
services such as investment management and account maintenance. Further,
participants should not be subject to penalties such as surrender
charges, liquidation fees, or market value adjustments.
All participants in the plan must be offered an
opportunity to diversify their portfolios with a broad range of other
options in addition to the default investments. You can limit your
liability for the participants’ investment decisions if you set up
your plan properly. (see Limiting Liability for more information)
Fiduciary Responsibilities -
In addition to selecting and monitoring the default
investments for automatic employee contributions, many of the other
actions needed to operate an automatic enrollment 401(k) plan involve
fiduciary decisions. This is true whether you hire someone to
manage the plan for you or do some or all of the plan management
yourself. Controlling the assets of the plan or using discretion in
administering and managing the plan makes you or the entity you hire a
plan fiduciary to the extent of that discretion or control. Thus,
fiduciary status is based on the functions performed for the plan, not a
title. Be aware that hiring someone to perform fiduciary functions is
itself a fiduciary act.
Some decisions with respect to a plan are business
decisions, rather than fiduciary decisions. For instance, the decisions
to establish a plan, to include certain features in a plan, to amend a
plan and to terminate a plan are business decisions. When making these
decisions, you are acting on behalf of your business, not the plan, and
therefore, you would not be a fiduciary. However, when you take steps to
implement these decisions, you (or those you hire) are acting on behalf
of the plan and thus, in making decisions, are acting as fiduciaries.
Basic Responsibilities -
Those persons or entities that are fiduciaries are in
a position of trust with respect to the participants and beneficiaries
in the plan. The fiduciary’s responsibilities include:
-
Acting solely in the interest of the participants
and their beneficiaries;
-
Acting for the exclusive purpose of providing
benefits to workers participating in the plan and their beneficiaries,
and defraying reasonable expenses of the plan;
-
Carrying out duties with the care, skill, prudence,
and diligence of a prudent person familiar with such matters;
-
Following the plan documents;
-
Diversifying plan investments.
These are the responsibilities that fiduciaries need
to keep in mind as they carry out their duties. The responsibility to be
prudent covers a wide range of functions needed to operate a plan. And,
since all these functions must be carried out in the same manner as a
prudent person would, it may be in your best interest to consult experts
in various fields, such as investments and accounting.
In addition, for some functions, there are specific
rules that help guide the fiduciary. For example, the deductions from
employees’ paychecks for contribution to the plan must be deposited
with the plan as soon as reasonably possible, but no later than the 15th
business day of the month following the payday.(1) If you can reasonably
make the deposits in a shorter timeframe, you need to make the deposits
at that time.
Limiting Liability -
With these responsibilities, there is also some
potential liability. However, there are actions you can take to
demonstrate that you carried out your responsibilities properly as well
as ways to limit your liability.
The fiduciary responsibilities cover the process used
to carry out the plan functions rather than simply the end results. For
example, if you or someone you hire makes the investment decisions for
the plan, an investment does not have to be a “winner” if it was
part of a prudent overall diversified investment portfolio for the plan.
Since a fiduciary needs to carry out activities through a prudent
process, you should document the decisionmaking process to demonstrate
the rationale behind the decision at the time it was made.
In addition to the steps above, there are other ways
to limit potential liability. The plan can be set up to limit your
liability for participants’ investment decisions when they exercise
control of the investments in their accounts. For participants to have
control, they must have sufficient information on the specifics of their
investment options. You can also hire a service provider or providers to
handle some or most of the fiduciary functions, setting up the agreement
so that the person or entity then assumes liability.
Hiring a Service Provider -
Even if you do hire a financial institution or
retirement plan professional to manage the whole plan, you retain some
fiduciary responsibility for the decision to select and keep that person
or entity as the plan’s service provider. Thus, you should document
your selection process and monitor the services provided to determine if
a change needs to be made.
Some items to consider in selecting a plan service
provider:
-
Information about the firm itself: affiliations,
financial condition, experience with 401(k) plans, and assets under
their control;
-
A description of business practices: how plan
assets will be invested if the firm will manage plan investments or how
participant investment directions will be handled, and proposed fee
structure;
-
Information about the quality of prospective
providers: the identity, experience, and qualifications of the
professionals who will be handling the plan’s account; any recent
litigation or enforcement action that has been taken against the firm;
the firm’s experience or performance record; if the firm plans to work
with any of its affiliates in handling the plan’s account; and whether
the firm has fiduciary liability insurance.
Once hired, these are additional actions to take when
monitoring a service provider:
-
Review the service provider’s performance;
-
Read any reports they provide;
-
Check actual fees charged;
-
Ask about policies and practices (such as trading,
investment turnover, and proxy voting); and
-
Follow up on participant complaints.
(For more information, see Understanding Retirement
Plan Fees and Expenses and a sample fee disclosure form at www.dol.gov/ebsa.
Go to “Fiduciary Education” under “Compliance Assistance” to
access the 401(k) Plan Fee Disclosure Tool.)
Prohibited Transactions and Exemptions -
There are certain transactions that are prohibited
under the law to prevent dealings with parties that have certain
connections to the plan, self-dealing, or conflicts of interest that
could harm the plan. However, there are a number of exceptions under the
law, and additional exemptions may be granted by the U.S. Department of
Labor, where protections for the plan are in place in conducting the
transactions.
One exemption allows the provision of investment
advice to participants who direct the investments in their accounts.
This applies to the buying, selling, or holding of an investment related
to the advice as well as to the receipt of related fees and other
compensation by a fiduciary adviser. Because a final rule is pending,
check www.dol.gov/ebsa periodically for the publication of the final
rule.
Another important exemption permits you to offer
loans to participants through your plan. If you do, the loan program
must be carried out in such a way that the plan and all other
participants are protected. Thus, the decision with respect to each loan
request is treated as a plan investment and considered accordingly.
Bonding -
Finally, persons handling plan funds or other plan
property generally must be covered by a fidelity bond to protect the
plan against losses resulting from fraud and dishonesty by those covered
by the bond.
Disclosing Plan Information to Participants -
Plan disclosure documents keep participants informed
about the basics of plan operation, alert them to changes in the plan’s
structure and operations, and provide them a chance to make decisions
and take timely action with respect to their accounts.
The automatic enrollment notice details the plan’s
automatic enrollment process and participant rights. The notice must
specify the deferral percentage, the participant's right to change that
percentage or not to make automatic contributions, and the default
investment.
The notice for EACAs and QACAs is similar to that
discussed under Notifying the Employees but does contain some additional
required information. To help in preparing your notice, a sample notice
(for EACAs, QACAs, and QDIAs) is available on both the DOL and IRS Web
sites under “Pension Protection Act.”
The participant generally must receive the initial
notice at least 30 days, but not more than 90 days, before eligibility
to participate in the plan or the first investment. Subject to certain
conditions, the notice may be provided, and an employee may be enrolled
in the plan, on the first day of work.(2)
An annual notice must be provided to participants and
all eligible employees at least 30 days, but not more than 90 days,
prior to the beginning of each subsequent plan year.
The summary plan description (SPD) – the basic
descriptive document - is a plain-language explanation of the plan and
must be comprehensive enough to apprise participants of their rights and
responsibilities under the plan. It also informs participants about the
features and what to expect of the plan. Among other things, the SPD
must include information about:
-
When and how employees become eligible to
participate in the 401(k) plan;
-
The contributions to the plan;
-
How long it takes to become vested;
-
When employees are eligible to receive their
benefits;
-
How to file a claim for those benefits; and
-
Basic rights and responsibilities participants have
under the Federal retirement law, the Employee Retirement Income
Security Act (ERISA).
This document must be given to participants when they
join the plan and to beneficiaries when they first receive benefits.
SPDs must also be redistributed periodically during the life of the
plan.
A summary of material modification (SMM) apprises
participants of changes made to the plan or to the information required
to be in the SPD. The SMM or an updated SPD must be automatically
furnished to participants within a specified number of days after the
change.
An individual benefit statement (IBS) shows the total
plan benefits earned by a participant, vested benefits, the value of
each investment in the account, information describing the ability to
direct investments, and an explanation of the importance of a
diversified portfolio. Plans that provide for participant-directed
accounts must furnish individual account statements on a quarterly
basis. In addition, the IBS must be provided when a participant submits
a written request, but no more than once in a 12-month period, and
automatically to certain participants who have terminated service with
the employer.
A summary annual report (SAR) is a narrative of the
plan’s annual return/report, the Form 5500, filed with the Federal
government. (see Reporting to Government Agencies for more
information) It must be furnished annually to participants.
Reporting to Government Agencies -
In addition to the disclosure documents that provide
information to participants, plans must also report certain information
to government entities.
Form 5500, Annual Return/Report of Employee Benefit
Plans -
Automatic enrollment 401(k) plans are required to
file an annual return/report with the Federal government, on which
information about the plan and its operation is disclosed to the IRS and
the U.S. Department of Labor. These disclosures are made available to
the public.
Depending on the number and type of participants
covered, most automatic enrollment 401(k) plans must file one of the
following forms:
-
Form 5500, Annual Return/Report of Employee Benefit
Plan, or
-
Form 5500-EZ, Annual Return of One-Participant
(Owners and Their Spouses) Retirement Plan
Most one-participant plans (sole proprietor/spouse
and certain partnership plans) with total assets of $250,000 or less are
exempt from the annual filing requirement. However, regardless of the
value of the plan’s assets, a final return/report must be filed when a
plan is terminated.
Form 1099-R - Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., is
given to both the IRS and recipients of distributions from the plan
during the year. It is used to report distributions (including
rollovers) from a retirement plan.
Permissible Withdrawals of Automatic Contributions
-
If an eligible automatic enrollment 401(k) plan (EACA)
has opted to allow employees to withdraw their automatic contributions
within 90 days of the first contribution, then those amounts,
distributed with earnings, are treated as taxable income in the year
distributed. They are reported on Form 1099-R and are not subject to the
10 percent additional early withdrawal tax.
Distributing Plan Benefits -
Benefits in an automatic enrollment 401(k) plan are
dependent on a participant’s account balance at the time of
distribution.
When participants are eligible to receive a
distribution, they typically can elect to:
Automatic enrollment 401(k) plans must be established
with the intention of being continued indefinitely. However, business
needs sometimes require that an employer terminate its plan.
Typically, the process of terminating an automatic
enrollment 401(k) plan includes amending the plan document, distributing
all assets, and filing a final Form 5500. You must also notify your
employees that the plan will be discontinued. Check with your plan’s
financial institution or a retirement plan professional to see what
further action is necessary to terminate your automatic enrollment
401(k) plan.
Even with the best intentions, mistakes in plan
operation can still happen. The U.S. Department of Labor and IRS have
correction programs to help automatic enrollment 401(k) plan sponsors
correct plan errors, protect participants and keep the plan’s tax
benefits. These programs are structured to encourage early correction of
the errors. Having an ongoing review program makes it easier to spot and
correct mistakes in plan operations. (see the Resources section for
further information)
Now that you are ready to get started, here are some
tips:
-
Have you adopted a written 401(k) plan that
provides for automatic enrollment?
-
Have you decided to hire a financial institution
or retirement plan professional to help you set up and run the plan?
-
Have you decided upon the percentage of
compensation for the automatic employee contributions? Have you
considered the level of employer contributions, whether optional or
required?
-
Have you decided to set up your plan as an EACA
and/or a QACA?
-
In selecting a default investment, have you
decided to meet the conditions for fiduciary liability relief for this
investment?
-
Have you developed a recordkeeping system that
includes tracking employee elections for those opting out of the plan
and for those employees who elect a different percentage?
-
Have you provided or are you prepared to provide
the initial notice to employees in advance of their first automatic
contributions? And are you prepared to satisfy the annual notice
requirements?
-
Are you familiar with the fiduciary
responsibilities of sponsoring an automatic enrollment 401(k) plan?
-
Are you prepared to monitor the plan’s service
providers and investments?
-
Are you familiar with the reporting and
disclosure requirements of an automatic enrollment 401(k) plan?
For help in establishing and operating an automatic
enrollment 401(k) plan, you may want to talk to a retirement plan
professional or a representative of a financial institution that offers
retirement plans – and take advantage of the help available in the
following Resources section.
To Find Out More…
Expanded information on the topics addressed in this
publication is available on the IRS and U.S. Department of Labor’s (DOL’s)
Employee Benefits Security Administration Web sites, www.irs.gov/ep and
www.dol.gov/ebsa. For the IRS, go to “Types of Plans” in the left
pane. For DOL, go to "Publications" and scroll down to
"Compliance Assistance Publications – Retirement."
The Web sites feature this publication as well as
additional information on automatic enrollment 401(k) plans and other
retirement plans, as listed below. Publications can be ordered by
calling the appropriate agency’s toll-free number – for the IRS, 1.800.TAX-FORM
(1.800.829.3676) or for DOL, 1.866.444.EBSA (3272).
The following items, issued by both the IRS and DOL,
are available on the Web and through the toll-free numbers:
-
Choosing a Retirement Solution for Your Small
Business, Publication 3998, provides an overview of retirement plans
available to small businesses.
-
401(k) Plans for Small
Businesses, Publication 4222,
provides detailed information regarding the establishment and operation
of a 401(k) plan.
-
Payroll Deduction IRAs for Small
Businesses,
Publication 4587, describes an arrangement that is an easy way for
businesses to give employees an opportunity to save for retirement.
-
SIMPLE IRA Plans for Small
Businesses, Publication
4334, describes a simple way for small businesses to contribute toward
retirement.
-
SEP Retirement Plans for Small
Businesses,
Publication 4333, provides a brief description of this low-cost type of
retirement plan.
-
Retirement Plan Correction
Programs, Publication
4224, provides a brief description of the IRS, DOL and Pension Benefit
Guaranty Corporation (PBGC) programs.
Related materials available from DOL:
For more information on automatic enrollment:
Field Assistance Bulletin 2008-03 addressing
frequently asked questions on QDIAs
Other materials for small businesses:
In addition, DOL sponsors two interactive Web sites -
the Small Business Advisor, available at www.dol.gov/elaws/pwbaplan.htm,
and, along with the American Institute of Certified Public Accountants (AICPA),
www.choosingaretirementsolution.org.
For employees:
Related materials available from the IRS:
-
The Retirement Plan Products
Navigator, Publication
4460.
-
Lots of Benefits, Publication 4118, discusses the
benefits of sponsoring a retirement plan and the stages involved in the
life cycle of a retirement plan.
-
Have You Had Your Check-up This Year for 401(k)
Retirement Plans, Publication 3066, encourages employers to perform a
periodic "check-up" of their 401(k) retirement plans through
the use of a checklist, and how to initiate corrective action if
necessary.
-
401(k) Plan Checklist, Publication 4531.
-
Designated Roth Accounts under a 401(k) or 403(b)
Plan, Publication 4530, discusses this popular feature found in many
401(k) and 403(b) plans
-
Retirement Plans for Small Business (SEP, SIMPLE, and
Qualified Plans), Publication 560.
To view these related publications, go to the
Retirement Plans Community Web page at www.irs.gov/ep and click on “EP
Forms/Pubs/Products” in the left pane.
-
A proposed rule provides a safe
harbor period for plans with fewer than 100 participants. If the
salary reduction contributions are deposited with the plan no later
than the 7th business day following withholding by the
employer, they will be considered contributed in compliance with the
law. Pending the adoption of a final rule by the Department of
Labor, the Department’s Employee Benefits Security Administration
(EBSA) will not assert a violation of ERISA regarding participant
contributions where such contributions are deposited with a small
plan within 7 business days. Because the final rule may change,
periodically check www.dol.gov/ebsa for the publication of the final
rule.
-
For more information on the
conditions, see the QDIA Final Rule at www.dol.gov/ebsa/pensionreform.html
or contact EBSA’s Division of Fiduciary Interpretations in the
Office of Regulations and Interpretations at 202.693.8510.
Automatic Enrollment 401(k) Plans for Small
Businesses is a joint project of the U.S. Department of Labor's Employee
Benefits Security Administration (EBSA) and the Internal Revenue Service
(IRS). This publication and other EBSA materials are available by
calling toll-free 1.866.444.EBSA (3272) or visit the agency's Web site
at www.dol.gov/ebsa. Automatic Enrollment 401(k) Plans for Small
Businesses (IRS Publication 4674) is also available from the IRS at
1.800.TAX-FORM (1.800.829.3676). Please indicate publication number when
ordering. This material is available to sensory impaired individuals
upon request: Voice phone: 202.693.8644, TDD: 202.501.3911.
|