ICI Asks IRS to Make Proposed Rules More Flexible, Cost-Efficient

Washington, DC, February 11, 2008 - ICI suggests changes to the IRS' proposed rules to further the Congressional purpose of encouraging employers to offer plans with automatic enrollment.

Background
The IRS proposed rules on automatic contribution arrangements that qualify for safe-harbor treatment for purposes of non-discrimination testing, specifically qualified automatic contribution arrangements (QACAs) and eligible automatic contribution arrangements (EACAs). These rules would clarify new practices for 401(k) plans, such as automatic enrollment, brought about after the Pension Protection Act of 2006 (PPA) passed.

ICI Position
In a letter to the IRS on the changes, ICI asks that the IRS clarify the proposed rules by making them more flexible and cost-efficient. The Institute strongly supports policies that facilitate automatic enrollment in retirement plans and we commend the Service for clarifying many issues through this proposal. The majority of our comments relate to the operation of EACAs, including how the plan year requirement should be applied, how current employees with pre-EACA plan elections on file should be treated, and what is required by the condition that assets be invested in accordance with regulations issued by the Department of Labor for default investments. We request clarification on a number of issues related to the operation of permissible withdrawals and the notice requirements for EACAs. Our letter also requests additional guidance on the notice timing requirement for both QACAs and EACAs for plans with immediate eligibility, and transitional relief for sponsors of calendar year plans that wish to implement automatic contribution arrangements during the 2008 plan year.

Related Links
This site includes a section devoted to retirement security issues affecting funds and their investors as well as a resource center on 401(k) issues.