Automatic Contribution Escalation

[PMC]

This is a separate question from the qualified automatic contribution arrangement under the PPA.

Currently many plans that utilize the automatic enrollment feature also use an automatic contribution escalation feature. The automatic enrollment feature is a plan provision. What about the automatic contribution escalation feature? Prototypes have the automatic enrollment provision but haven't seen any with the automatic contribution escalation feature.

Do you think the ability to automatically increase deferrals must also be a plan provision? Or do you think if a Prototype (which gives the participant the ability to change deferral amounts) simply provided for language to change deferral amounts such as "at such times as established by the Plan Administrator in a uniform and nondiscriminatory manner" AND an annual Notice (included in the AE notice) is provided to employees describing their ability not to have the contribution escalation applied to them would be acceptable? If not, how are Prototypes currently dealing with the automatic contribution escalation feature?

[PMC]

Anyone have any comments?

[RCK]

I don't have a cite, but am always willing to provide an off -the-cuff answer. I think that it has to be a plan provision.

We've been doing autoenrollment since 1999, and that was definitely a plan amendment. Look at it this way--you're going to put it in the Summary Plan Description aren't you?

[PMC]

Understood the automatic enrollment feature must be a plan provision but was wondering about the automatic contribution escalation and if that MUST be included in the plan (rather than just in employee notices)? And if so, how is this being covered by current Prototypes?