EACA (Eligible Automatic Contribution Arrangements)

EACA stands for "eligible automatic contribution arrangement". This one of two plan design approaches to 401k automatic enrollment authorized by the Pension Protection Act of 2006 (PPA). (See also QACA.) Adopting an EACA enables employers to unilaterally enroll employers in their 401(k) plans at a specified percentage of compensation and invest contributions in government-approved default investment funds without fear of fiduciary liability, and without being subject to state garnishment law restrictions.

Under an EACA, an employee may affirmatively elect to participate in the plan by having the employer make salary reduction contributions to the plan. Absent such an election, the employee will be treated as having elected to have the employer make a salary reduction contribution to the 401(k) plan at a uniform percentage of compensation. The contribution will be made until the participant specifically elects not to have the contribution made or specifically elects to have the contribution made at a different percentage.

Eligible Automatic Contribution Arrangements (EACAs) permit the penalty-free distribution of “accidental” automatic deferrals and provide a six-month period to distribute excess contributions and excess aggregate contributions without imposition of the 10% excise tax;