Automatic Enrollment 401(k) Plans For Small Businesses

• 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.

Establishing An Automatic Enrollment 401(k) Plan

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:

1. Adopt a written plan document

2. Arrange a trust fund for the plan’s assets

3. Develop a recordkeeping system

4. 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.

Operating An Automatic Enrollment 401(k) 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

Participation

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.

Contributions

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:

• 100 percent of the employee’s compensation, or

• $49,000 (for 2009).

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:

• Take a lump sum distribution of their account;

• Roll over their account to an IRA or another employer’s retirement plan; or

• Purchase an annuity.

Terminating An Automatic Enrollment 401(k) Plan

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.

Compliance

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)

An Automatic Enrollment 401(k) Plan Checklist

Now that you are ready to get started, here are some tips:

1. Have you adopted a written 401(k) plan that provides for automatic enrollment?

2. Have you decided to hire a financial institution or retirement plan professional to help you set up and run the plan?

3. 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?

4. Have you decided to set up your plan as an EACA and/or a QACA?

5. In selecting a default investment, have you decided to meet the conditions for fiduciary liability relief for this investment?

6. 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?

7. 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?

8. Are you familiar with the fiduciary responsibilities of sponsoring an automatic enrollment 401(k) plan?

9. Are you prepared to monitor the plan’s service providers and investments?

10. 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.

Resources

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:

• Understanding Retirement Plan Fees and Expenses

• Meeting Your Fiduciary Responsibilities

• Selecting an Auditor for Your Employee Benefit Plan

• Reporting and Disclosure Guide for Employee Benefit Plans

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:

• A Look at 401(k) Plan Fees

• What You Should Know about Your Retirement Plan (also in Spanish)

• Savings Fitness…A Guide To Your Money and Your Financial Future (also in Spanish)

• Taking the Mystery Out of Retirement Planning

• Top 10 Ways to Prepare for Retirement (also in Spanish)

• Women and Retirement Savings (also in Spanish)

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.

Footnotes

1. 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.

2. 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.