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In the final regulations, the IRS addressed a question on whether employers should start rehired employees subject to qualified automatic contribution arrangements at the deferral percentage at which they were deferring when they terminated, or at the minimum deferral percentage under the arrangement. The IRS said that if the employee has been terminated for one year or more, then the plan sponsor can automatically enroll the employee in the plan at the minimum deferral percentage under the arrangement upon rehire. The final rules also allow employers to provide for an automatic contribution percentage escalation in the middle of the plan year and not just at the beginning of each plan year to coincide with salary increases or performance evaluations, as long as the provision is applied uniformly to all employees. Notification Requirements The rules for qualified automatic contribution arrangements require that employees be provided notice of their automatic enrollment in the sponsor's plan at 30 days and no more than 90 days prior to eligibility and annually prior to the beginning of each plan year. This presented a problem for plans in which participants were immediately eligible for participation upon hire (see IRS Issues Additional Auto Enrollment Guidance ). The IRS' final regulations addressed the problem by providing that "if it is not practicable for the notice to be provided on or before the date specified in the plan that an employee becomes eligible, the notice will nonetheless be treated as provided timely if it is provided as soon as practicable after that date and the employee is permitted to elect to defer from all types of compensation that may be deferred under the plan earned beginning on that date."
In the final regulations, the IRS addressed a question on whether employers should start rehired employees subject to qualified automatic contribution arrangements at the deferral percentage at which they were deferring when they terminated, or at the minimum deferral percentage under the arrangement. The IRS said that if the employee has been terminated for one year or more, then the plan sponsor can automatically enroll the employee in the plan at the minimum deferral percentage under the arrangement upon rehire.
The final rules also allow employers to provide for an automatic contribution percentage escalation in the middle of the plan year and not just at the beginning of each plan year to coincide with salary increases or performance evaluations, as long as the provision is applied uniformly to all employees.
Notification Requirements
The rules for qualified automatic contribution arrangements require that employees be provided notice of their automatic enrollment in the sponsor's plan at 30 days and no more than 90 days prior to eligibility and annually prior to the beginning of each plan year. This presented a problem for plans in which participants were immediately eligible for participation upon hire (see IRS Issues Additional Auto Enrollment Guidance ).
The IRS' final regulations addressed the problem by providing that "if it is not practicable for the notice to be provided on or before the date specified in the plan that an employee becomes eligible, the notice will nonetheless be treated as provided timely if it is provided as soon as practicable after that date and the employee is permitted to elect to defer from all types of compensation that may be deferred under the plan earned beginning on that date."
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