Now more than ever it is imperative that the American family starts taking a closer look at their financial future. Now more than ever it is up to the nation to offer easier ways for the American family to start saving. The government is continuously working on finding more efficient ways for small businesses to offer programs for their employees that will help with this initiative. One of the latest initiatives set forth by the Department of the Treasury is the expansion of automatic enrollments in 401(k) plans by allowing small businesses a more streamlined approach to amending plans to include automatic enrollment.
As noted in the blog entitled “Auto Enrollment: Improving 401(k) Nondiscrimination Results”, auto enrollment can can help small businesses increase participation, allowing for an improvement in the 401(k) Nondiscrimination testing. Auto enrollment allows companies to automatically take out a portion of an employee’s paycheck and deposit it into a 401(k) account. Employees are allowed to “opt out” if they do not wish for the contribution to be withheld. They may also elect to have more or less withheld than is automatically withheld.
In the past, the IRS was approving plan amendments for the automatic enrollment on a Plan by Plan basis to ensure legal compliance. The IRS will now issue pre-approved automatic enrollment language that will allow the small businesses to adopt the automatic enrollment amendment in a more efficient manner.
For more information on the new retirement security initiatives, visit www.irs.gov.