January 1, 2008 marked the date where rules governing Qualified Automatic Contribution Arrangements (QACA) went into effect. Just what is a QACA? A QACA is basically a traditional safe harbor 401(k) plan with an an automatic enrollment provision and some new safe harbor features that were outlined in the Pension Protection Act of 2006. An article by McKay Hochman Co., Inc. does a nice job of detailing the various requirements of the QACA.

If you're unaware of what a safe harbor 401(k) plan is, it is a type of 401(k) plan where certain provisions are put into place in order for the plan to meet non-discrimination requirements and therefore, is not subject to non-discrimination (ADP/ACP) testing. They can be an advantage for small businesses who may have a larger percentage of Highly Compensated Employees. It can also help small businesses who don't have the resources to put into making sure the plan meets the testing requirements each year. Also, with a safe harbor plan, the owner (and any other Highly Compensated Employee) can receive a contribution, as long as it's not more than the 3 percent of compensation required for all eligible non-Highly Compensated Employees.

NADART offers both traditional safe harbor 401(k) plans and QACA plans. If you'd like to learn more, please contact a NADART representative at (800) 462-3279 ext. 7161 or e-mail nadart401k@nada.org.