401(k) Plans and Automatic Enrollment Issues
In the IRS's Tax Information for Sponsors of Retirement Plans, Volume 6, Summer 2009, the IRS forces an employer to consider how to correct for a common 401(k) automatic enrollment problem. Prior to this issue, an employer had to guess how to make a correction. However, the IRS's proposed solution still leaves room for guessing or creativity on the company's part. As such, many companies have made errors with automatic enrollment into 401(k) plans. For a long time, companies wanted to increase the participation in their 401(k) plans and paternalistically increase employee retirement savings. Generally effective in 2006, companies could automatically enroll an employee at a set percentage of compensation right into their 401(k) plans.
