IRS Issues Final Regulations Governing QACAs and EACAs

The IRS has issued final regulations (copy via Benefitslink.com) relating to automatic contribution arrangements. The regulations affect 401(k) plans and other eligible plans that include an automatic contribution arrangement. Effective Dates: The regulations have a general effective date of February…

The IRS has issued final regulations (copy via Benefitslink.com) relating to automatic contribution arrangements. The regulations affect 401(k) plans and other eligible plans that include an automatic contribution arrangement.

Effective Dates: The regulations have a general effective date of February 24, 2009. However, except as provided in §§1.401(k)-3(j)(1)(i) and 1.401(m)-2(a)(6)(ii), the final regulations relating to qualified automatic contribution arrangements (“QACAs”) apply to plan years beginning on or after January 1, 2008. The regulations relating to eligible automatic contribution arrangements (“EACAs”) apply for plan years beginning on or after January 1, 2010.

The regulations go on to provide that, for plan years that begin in 2008, a plan must operate in accordance with a good faith interpretation of Internal Revenue Code Section 414(w). The regulations state that , for this purpose, a plan that operates in accordance with the proposed regulations under §1.414(w)-1 or these final regulations will be treated as operating in accordance with a good faith interpretation of Code Section 414(w).

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