Last Call! PPA Plan Restatement Deadline Drawing Near

By Rachel Mulloy

The deadline for employers that use pre-approved retirement plan documents to sign an updated version of their 401(k), profit-sharing, money purchase, or other defined contribution plan, is drawing near.

The IRS requires all pre-approved plans to be updated or “restated” in their entirety every six years to incorporate legislation that was enacted since the last update and to receive the IRS’s approval for another six years.  The latest six-year cycle, generally known as the “PPA restatement cycle,” ends on April 30, 2016 and takes into account such legislation (and related IRS guidance) as the Pension Protection Act (PPA), the final Section 415 regulations, the Heroes Earnings Assistance and Relief Tax Act (HEART), and the Worker, Retiree, and Employer Recovery Act (WRERA).  The cost of restating the plan can

401(k) Automatic Deferrals With a Safe Harbor Twist

By G. Alexander Hamilton

Memo to 401(k) Plan Sponsors —

Do you hate dealing with the ADP/ACP nondiscrimination tests each year?

Does your plan have trouble passing the tests?

Does the automatic enrollment/deferral feature that the government encourages interest you?

If the answer to any of these questions is “yes,” you may want to consider modifying your plan to make it a “Qualified Automatic Contribution Arrangement” or “QACA.” The QACA rules were enacted as part of the Pension Protection Act of 2006 (PPA) and are effective beginning in 2008. Final regulations were adopted in 2009. The QACA combines automatic enrollment/deferrals with certain minimum employer contributions — either across the board contributions or matching contributions — such that the annual ADP/ACP nondiscrimination rules are automatically satisfied and no testing is necessary. This is one of two “safe-harbor” design options that are available for 401(k) plan sponsors who want to avoid the annual ADP/ACP testing requirements.