IRS eases automatic enrollment in 401(k) plans

As Gene Perret once said, "Retirement: It's nice to get out of the rat race, but you have to learn to get along with less cheese. Of course, if you have a 401(k) plan available to you, take full advantage of it especially since the IRS has lessened the complexity for employee automatic enrollment.

The Internal Revenue Service and the Treasury Department have issued guidance aimed at making it easier for taxpayers to be automatically enrolled in retirement plans such as 401(k) and 403(b) plans by their employers, simplifying the correction methods if errors are made.

The guidance in Revenue Procedure 2015-28, issued Thursday, is designed to facilitate automatic enrollment and contribution increases in 401(k) and similar retirement savings plans. This guidance adds to the current IRS self-correction program, which allows plan sponsors to easily correct administrative errors without risking the plan’s tax qualification and without having to obtain IRS approval.

“Today, Treasury and IRS are taking another step to promote broader participation in 401(k) and similar plans by facilitating automatic enrollment and automatic contribution increases,” said J. Mark Iwry, senior advisor to the Secretary and Deputy Assistant Secretary for Retirement and Health Policy. “These simplified, safe harbor correction methods build on previous steps to encourage plan sponsors to adopt “next generation” features and practices that help employees save for retirement.”

The new guidance responds to public comments from 401(k) sponsors and service providers. The guidance simplifies and reduces the cost and burden of the correction process if a 401(k) or 403(b) plan using automatic enrollment or automatic increases fails to implement the correct amount of employee contribution.

The correction safe harbor for plans with automatic contribution features requires the plan sponsor to make all employer matching contributions that should have been made with respect to the missed employee contributions, and to contribute an additional amount to make up for the earnings that should have accrued under the plan on those matching contributions. In addition, the plan is required to notify participants of errors and corrections, and of their ability to make up for the missed employee contributions by electing larger employee contributions going forward.

The guidance also provides other new safe harbor methods to simplify and reduce the cost and burden of correcting certain errors in 401(k) and similar plans regardless of whether they use automatic enrollment or automatic increases.

The new correction methods are effective immediately. The new safe harbor for plans using automatic contribution features applies to administrative errors occurring before 2021. The guidance also invites public comment on potential further improvements.

Sen. Ron Wyden, D-Ore., the ranking Democrat on the Senate Finance Committee, noted that the guidance will facilitate automatic enrollment in and contributions to 401 (k) and similar retirement plans by improving the process for correcting errors to make it easier for businesses to maintain these plans for their workers. Last year, Wyden and several other Democratic members of the Finance Committee sent a letter to the Treasury Department requesting action on this issue.

“These improvements from Treasury and the IRS mark an important step in helping millions of Americans save for a secure retirement,” Wyden said in a statement Thursday.

“Automatic enrollment in retirement plans is a promising method to increase retirement saving. The changes made today will make it easier for small businesses to set up a retirement plan with automatic enrollment features and help more middle-class Americans prepare for retirement.”

Integrated Insurance Agency (IIA) has the ability to set you or your company up with an automatic enrollement of your 401k / 403B, Roth IRA, or retirement plan just reach out to your local IIA Associate to help guide you through the right process.

If you are interested in making sure that you have a retirement plan that will afford you the retirement

lifestyle you desire, make sure that you reach out to Integrated Insurance Agency by calling 888-823-1342 and asking to meet with our wealth management associates.

It will cost you nothing to get an assesment, and your local Integated Insruance Agency associate will assist you with that peace of mind to make sure your financial projection for retirement will allow your 'Golden Years' to be what you planned them to be.

Integrated Insurance Agency has several offices to serve you and has a presence in most states.

Don't wait! Because you are getting closer to retirement with each passing day. It will be hear before you know, so be prepared and enjoy the retirement you worked so hard for.