Obama Administration Issues Guidance to Promote Retirement Savings
November 13, 2009
The IRS recently issued several notices and revenue rulings intended to promote retirement savings. Among those announcements are various sample plan amendments for expanding plan enrollment, and guidance on increasing default plan contributions. Included in such announcements are the following:
1. Automatic enrollment is a tool employers can use to increase participation in plans as well as help to pass discrimination testing. In an effort to assist employers to implement such a feature, the IRS has provided sample amendments to add an automatic enrollment feature to 401(k) plans. Such amendments can be found in IRS Notice 2009-65. Similar amendments for SIMPLE IRA plans can be found in IRS Notice 2009-67.
2. IRS Notice 2009-66 provides guidance on implementing and administering automatic enrollment in SIMPLE IRAs, including notice requirements and permissible increases to default contribution percentages. Revenue Ruling 2009-30 provides an explanation of the process that would permit automatic, gradual contribution increases under 401(k) plans over time.
3. Section 402(f) of the Internal Revenue Code requires that administrators of qualified retirement plans provide written, easily understandable explanations to "eligible rollover distributions" (ERD) recipients of rules applicable to such distributions. IRS Notice 2009-68 provides updated safe-harbor model § 402(f) notices that outline various rules applicable to ERDs, describe a participant's options upon receiving an ERD, and reflect recent changes in the law. These notices are intended to encourage employees to choose tax-free rollover options when changing jobs.
4. Qualified retirement plans may, in certain circumstances, permit contributions of the value of an employee's unused paid time off, either annually or at termination of employment. Revenue Rulings 2009-31 and 2009-32 explain how employers can permit such contributions.
If you would like more information on the content of this alert, please contact Christine Burke Worthen, a shareholder and Chair of Eaton Peabody's Tax Practice Group, or Rodney A. Lake.
This alert is provided as general information, and is not a substitute for legal or other professional advice.
To ensure compliance with requirements imposed by the U.S. Treasury Department and the Internal Revenue Service, we also inform you that any federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose
