401k Automatic Enrollment for Small Businesses
The IRS, in conjunction with Employee Benefits Security Administration, has released Automatic Enrollment 401k Plans for Small Businesses, a guide to helping businesses set up and administer automatic enrollment.
The plain-language guide covers key aspects of automatic enrollment including:
- Why an automatic enrollment 401(k) plan?
- Establishing an automatic enrollment 401(k) plan
- Operating an automatic enrollment 401(k) plan
- Terminating an automatic enrollment 401(k) plan
- Compliance
Automatic 401k Enrollment
401k automatic enrollment employee communication and notice requirements are covered:
The automatic enrollment notice details the plan’s automatic enrollment process and participant rights. The notice must specify the deferral percentage, the participant’s right to change that percentage or not to make automatic contributions, and the default investment.
The participant generally must receive the initial notice at least 30 days, but not more than 90 days, before eligibility to participate in the plan or the first investment. Subject to certain conditions, the notice may be provided, and an employee may be enrolled in the plan, on the first day of work.
An annual notice must be provided to participants and all eligible employees at least 30 days, but not more than 90 days, prior to the beginning of each subsequent plan year.
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