What Are Eligi🎃ble Automatic Contribution Arra🧸ngements?

Eligible automatic contribution arrangements (EACAs) establish a default percentage of an employee’s pay to be automatically contributed to a retirement account. EACAs apply when employees do not provide explicit instructions regarding pretaꦛx contributions to a qualif🌟ied retirement account provided by an employer.

Understanding Eligible Automatic Contribution A🐷rrangements

Eligible automatic contribution arrangements were created as part of the Pension Protection Act of 2006 (PPA) to encourage more worker participation in self-funded 澳ಌ洲幸运5官方开奖结果♈体彩网:defined-contribution retirement plans. Before the creation of automatic contribution arrangements (ACAs), employees typically needed to make an affirmative choice to contribute a certai💮n percentage of their pretax earnings to an employer-provided retirement plan.

ACAs provide increased legal protection for employers to create a new default state in which employees who take no action with regard to their employer-provided plans make payments at a rate established by the plan. In theory, this raises participation rates in retirement plans by forcing employees who do not wish to par🔜ticipate to ꦆmake an affirmative choice to opt-out of the plan.

Suppose an employee joins a firm and ignores the pile of 澳洲幸运5官方开奖结果体彩网:human resources paperwork about retirement plans. If the firm uses an EACA, then the employee will eventually receive a paycheck with pretax earnings contributed to their retirement fund as outlined by the program. If the employee decides not to participate or decides t🎶o increase or decrease the pe꧑rcentage of contributions, they would have to explicitly decline to participate or fill out paperwork to increase or decrease the percentage o💫f pay going into the plan.

Based on the plan’✤s rules, the employee might be able to recoup any automatic contributions made within 90 days of the withdrawal.

EACAs vs. QACAs

The PPA defines two different choices for employers who want to add an automatic contribution arrangement. EACAs have simpler requirements than the other alternative, 🍸澳洲幸运5官方开奖结果体彩网:qualified automatic contribution arrangements (QACAs).

Under an EACA, participants automatically contribute a specific, uniform percentage of their gross pay to a qualified investment plan provided by the employer. Employers using an EACA must treat all employees who do not provide any explicit enrollment instructions the same, enrolli🏅ng them in the same plan at the same contribution rate.

Employers also must provide their employees with adequate notice and information about the plan, as well as their contribution and withdrawal rights. Some plans provide employees with a 澳洲幸运5官方开奖结果体彩网:grace period during💙 w💧hich they can withdraw their automatic contributions without penalty if they decide not to participate.

QACAs provide employers safe harbor provisions exempting them from actualဣ deferral percentage and actual contribution percenജtage (ADP/ACP) testing that other plans must undergo to ensure that they do not discriminate against lower-paid employees. In return, employers must make matching contributions as required by the Internal Revenue Service (IRS) and must vest matching and non-elective contr🦋ibutions within two years.

The defaultཧ deferred contribution for a QACA must also increase annually from at least 3% the first year to at least 6%, with a maximum of 10% in any year.