Groups Recommend Correction for Auto-Enrollment Failures

September 19, 2012 ( – Industry groups have recommended to the Internal Revenue Service (IRS) a “safe harbor” correction for automatic enrollment failures.

In a comment letter, the  American  Society  of  Pension  Professionals  &  Actuaries  (ASPPA)  and  the  Council  of Independent 401(k) Recordkeepers (CIKR) said they are writing to request additional enhancements to the Employee Plans Compliance Resolution System (EPCRS) to encourage companies to include automatic enrollment provisions in their plans.  

Specifically, ASPPA and CIKR recommend that the service modify the “safe harbor” correction methods under EPCRS to provide that, in the case of a plan with automatic enrollment, if an employee is inadvertently excluded from the plan or his deferral rate is not automatically increased in accordance with the plan’s provisions, an acceptable correction method would be: 1) to make a  corrective  qualified  non-elective  contribution  (QNEC)  with  respect  to  any  matching contribution failures occurring during the period of exclusion or non-escalated enrollment rate (adjusted for earnings); and 2) to provide affected participants who remain employed with the opportunity to contribute, out of future compensation, make-up elective deferrals for the amounts that were not withheld.  

The letter is here.