Among other things, Code sections 401(k)(13) and 414(w) include notice requirements that plan sponsors must satisfy in order to maintain a QACA or an EACA.
To aid plan sponsors in satisfying the requirements of the IRS's proposed regulations for the 2008 plan year--the first plan year that a plan may include a QACA or EACA--the IRS posted a sample "Automatic Enrollment Notice" on its website that satisfies notice requirements under Code sections 401(k)(13) and 414(w) for a hypothetical QACA that permits EACA withdrawals and has certain other characteristics.
The hypothetical QACA described in the sample notice includes the following characteristics:
QACA requirements: The following are among the important changes and clarifications made by the final regulations:
Clarification of timing for initial notice of the QACA arrangement and for the effective date of a default election; and
Clarification that matching or nonelective contributions under a QACA (which must be made to each eligible employee under the plan) may not be withdrawn on account of hardship.
The final regulations apply to plan years beginning on or after January 1, 2008, for
QACAs and January 1, 2010, for EACAs.
The rate of elective contributions under a cash or deferred election that is in effect on the effective date of the default percentage under the QACA is not reduced; or
Thus, the proposed regulations would apply the same timing rules to the EACA notice that are applied to the QACA notice.
Effective date: The QACA and EACA rules are effective for plan years beginning on or after January 1, 2008.
The AICPA also requested that the final regulations explicitly address whether employer contributions required for a QACA under Sec.
Finally, the AICPA has requested that the notice content requirement for the eligible automatic contribution arrangement (EACA) and QACA notices should be similar to the relief given in Notice 98-52 to the required safe-harbor notices for plan years beginning before January 1, 2000.
