ACA vs EACA

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What is the difference between a Automatic Contribution Arrangement (ACA) and an Eligible Automatic Contribution Arrangement (EACA)?

[Peanut Butter Man]

Section 902 of PPA added new Internal Revenue Code section 414(w), which defined an Eligible Automatic Contribution Arrangement as an arrangement under an applicable employer plan -

A. under which a participant may elect to have the employer make payments as contributions under the plan on behalf of the participant, or to the participant directly in cash;

B. under which the participant is treated as having elected to have the employer make such contributions in an amount equal to a uniform percentage of compensation provided under the plan until the participant specifically elects not to have such contributions made (or specifically elects to have such contributions made at a different percentage);

C. under which, in the absence of an investment election by the participant, contributions described in subparagraph (B) are invested in accordance with regulations prescribed by the Secretary of Labor under section 404©(5) of the Employee Retirement Income Security Act of 1974, and

D. which meets the requirements of paragraph (4).

Paragraph 4 is the notice requirement, and the timing requirement for distributing the notice.

I don't think the term "automatic contribution arrangement" has been specifically defined by the Code or the Regs. I think it is a more generic term meaning any automatic contribution arrangement which is not a qualified automatic contribution arrangement (QACA).

[Guest tmills]

Excuse me for jumping in on this question but I'm curious about whether an automatic enrollment (negative election) plan with no participant investment direction could still be an EACA. It certainly meets 414(w)(3)(A) and (B) and could meet the notice requirement in (D). The issue is ( C ). ( C ) says in the absence of an investment election by the participant, which would certainly be the case in my example, the contribution is invested in accordance with the QDIA regs. If we assume for the moment that the plan's sole investment option complies with the investment requirements of the new regs., then the notice could meet the requirements by stating there is no ability to direct investments along with the other required notice elements. Would the result be an EACA? Does the lack of participant direction preclude EACA treatment regardless of whether the other requirements are met?

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Since an EACA is required to have a QDIA and part of the final QDIA regs state the participant must have had the opportunity to direct investments in his or her account, but failed to do so. I would think you cannot have an EACA without participant direction.