Many employers looking to increase participation in their 401k plans are considering the addition of an automatic contribution feature - a plan that forces employees to opt out of retirement savings instead of opting into plan participation. The Internal Revenue Service (IRS) has recently released proposed rules on  the "qualified automatic contribution arrangement" (QACA) that becomes available in 2008. Plans with a QACA will generally not have to undergo contribution nondiscrimination testing and will satisfy the top heavy rules that can reduce the benefits of plan participation for key employees and owners.

The IRS-published Retirement News for Employers, issued in November 2007, includes a useful summary of QACA rules. If you are interested in sponsoring a 401k plan with an automatic enrollment  feature of any type, please contact us for additional information. We can help you determine if this feature makes since for your organization.