QACA Auto Increase

[Guest ScarletKnight]

The proposed QACA regs call for autoincrease of the minimum percentage immediately following the last day of the next plan year following the date the employee participates. As the preamble notes, this can mean the initial autoincrease may not take effect for two years (ex. employee who participates 1/1/08 will not be autoincreased until 1/1/10). It is clear that you can choose to start with a greater initial percentage (4% in the preamble), but what is not clear is whether autoincreases can be made on a more rapid basis (Employees who participate 1/1/08 autoincreased on 1/1/09? Employees who participate on 6/15/10 be autoincreased on 1/1/11?) Any thoughts?

[John Feldt ERPA CPC QPA]

The percentages of auto increases and the timing are minimums. If you want to increase quicker, then you are okay as long as your percentage is equal to or greater than the minimum that would be required for that time period for each participant.

We have had a few clients who decided to just start the automatic percentage at 6% to avoid having to track when the increases have to occur.

[R. Butler]

We have had a few clients who decided to just start the automatic percentage at 6% to avoid having to track when the increases have to occur.

Can you simply start at the 6% & stay there or would you still have to increase until you got to the 10%? I know that if you start at 3% you can stop at 6%. For whatever reason I thought that if you started at a higher percentage you would still have to increase, but you could never exceed 10%.

Thanks for any guidance.

[John Feldt ERPA CPC QPA]

You can stay at 6% - that is as high as you are required to go for automatic enrollment. The plan sponsor could adopt provisions to apply higher automatic amounts (above 6%), but only as long as these automatic amounts are not more than 10% of pay.

We also have one client who either wants employees to really be sure to save enough, or the client wants to discourage deferrals (you pick) - they automatically enroll everyone at 10%.