IRS Clarifies SECURE Act Changes to Qualified Automatic Contribution Arrangements

The IRS recently published Notice 2020-86 (the “Notice”), which provides clarification with respect to certain changes made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”). In particular, the Notice answers several outstanding questions related to the maximum default deferral rate for qualified automatic contribution arrangements.

As previously reported here, the SECURE Act raised the maximum permissible deferral rate for qualified automatic contribution arrangements to 15% of compensation from 10% of compensation for the second plan year and all subsequent plan years. The maximum deferral rate through the end of the first year remains set at 10% of compensation. Read More ›

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IRS Provides Relief for Correction of Elective Deferral Mistakes in 401(k) Plans

The IRS recently announced changes that make it significantly easier to correct employee deferral mistakes (also known as elective deferrals) in qualified retirement plans.  The changes make modifications to the IRS’ Employee Plans Compliance Resolution System (“EPCRS”), which is the IRS’ comprehensive correction program for qualified retirement plans.

Automatic Enrollment Correction Relief

If a qualified plan has automatic enrollment and it either (1) does not automatically enroll employees in accordance with the terms of the plan’s automatic enrollment feature or (2) does not implement an employee’s affirmative election, the new guidance provides that as long as the employee is enrolled in the plan within 9-1/2 months following the end of the plan year of the failure (or earlier if the employee notifies the employer of the mistake), the employer is not required to make a correction for the missed elective deferrals.  Read More ›

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