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The Internal Revenue Service (IRS) recently released Revenue Ruling 2009-30, Automatic Contribution Increases under Automatic Contribution Arrangements. This Revenue Ruling addressed two issues:

1. Will default contributions to a profit-sharing plan fail to be considered elective contributions merely because they are made pursuant to an automatic contribution arrangement under which an eligible employee’s default contribution percentage automatically increases in plan years after the first plan year of the eligible employee’s participation in the automatic contribution arrangement based in part on increases in the eligible employee’s plan compensation?
2. Will default contributions under an automatic contribution arrangement fail to satisfy the qualified percentage requirement (including uniformity and minimum percentage requirements) relating to a “qualified automatic contribution arrangement” under §401(k)(13) of the Internal Revenue Code of 1986 (IRC) (providing an automatic enrollment nondiscrimination safe harbor) or the uniformity requirement relating to an “eligible automatic contribution arrangement” under IRC §414(w) (permitting 90-day withdrawals) merely because default contributions are made pursuant to an arrangement under which the default contribution percentage for all eligible employees increases on a date other than the first day of a plan year?

In situation 1, the IRS concludes as follows:

Default contributions to a profit-sharing plan will not fail to be considered elective contributions merely because they are made pursuant to an automatic contribution arrangement under which an eligible employee’s default contribution percentage automatically increases in plan years after the first plan year of the eligible employee’s participation in the automatic contribution arrangement based in part on increases in the eligible employee’s plan compensation.

In situation 2, the IRS concludes as follows:

Default contributions under an automatic contribution arrangement will not fail to satisfy the qualified percentage requirement (including uniformity and minimum percentage requirements) relating to a qualified automatic contribution arrangement or the uniformity requirement relating to an eligible automatic contribution arrangement merely because default contributions are made pursuant to an arrangement under which the default contribution percentage for all eligible employees increases on a date other than the first day of a plan year.

Contact Vision Payroll if you have any further questions on automatic contribution increases under automatic contribution arrangements.

The Treasury Department recently released the following statement by Treasury Secretary Tim Geithner:

“[Recently], the Administration announced steps we are taking to make it easier for working families to save, particularly for retirement. Working Americans should be able to retire with dignity and security, but nearly half of the nation’s workforce has little or nothing beyond Social Security benefits to get by on in old age. The measures we are announcing today will give more choices to families who want to save, and will complement the Administration’s legislative proposals to expand retirement savings. Just as the Administration is dedicated to reviving the economy and getting people back to work, so too it is dedicated to helping put retirement security within the reach of all Americans.”

The IRS also issued the following related technical guidance:

1. Revenue Ruling 2009-30
2. Revenue Ruling 2009-31
3. Revenue Ruling 2009-32
4. Notice 2009-65
5. Notice 2009-66
6. Notice 2009-67
7. Notice 2009-68

Vision Payroll will be providing further information over the next several days. Be sure to click the links above for the original documents and further analysis.