December 6, 2007

PPA Notices…Re-Visited Again!

The IRS and Treasury have been busy issuing guidance that will assist plan sponsors in their efforts to make certain retirement plans remain qualified.

One of the components of the Pension Protection Act (PPA) is an automatic enrollment feature that can be adopted by a defined contribution plan.  If a plan adopts an automatic enrollment feature, then there is a participant notice requirement. 

To assist plan sponsors in satisfying this notice requirement, the IRS has issued a sample notice that can be tailored to meet the specifics of the plan (see Sample Automatic Enrollment and Default Investment Notice).  This notice must be provided to participants at least 30 days prior to the beginning of each plan year.

On a related topic, the PPA includes provisions for qualified default investment alternatives (see “Contents of Notice” under the discussion of QDIA’s from last month’s Benefit Beat).  It, too, has a notice requirement, governed by the DOL.  The DOL has reviewed the sample notice, as provided by IRS and Treasury above, and has indicated that this notice can satisfy the QDIA requirements, as long as it is provided within the timeframe for providing a QDIA notice. 

It is very important to remember that the sample notice is based upon particular set of plan criteria.  It must be reviewed and modified to comply with the terms and conditions of the plan for which the notice is to be used.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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