HR6729-119

What This Bill Does

This bill amends the Internal Revenue Code automatic contribution rules for qualified automatic contribution arrangements, eligible automatic contribution arrangements, and ERISA automatic contribution arrangements. A plan would not lose its qualifying status merely because an employee or participant opt-out election terminates after at least one year and not more than three years, after which the worker is treated as electing automatic deferrals unless the worker makes a new affirmative opt-out election. The bill also addresses previously disregarded employees and includes no-inference language for prior law.

Who Benefits and How

Employers and retirement plan administrators benefit from explicit authority to use periodic automatic reenrollment without jeopardizing automatic contribution arrangement status. Workers who previously opted out may benefit if automatic reenrollment causes them to resume retirement saving and employer matching where available.

Who Bears the Burden and How

Employees with expired opt-out elections bear the practical burden of monitoring notices and making a new affirmative opt-out if they still do not want deferrals. Plan administrators and employers must track opt-out dates, apply the one-to-three-year reenrollment window, update notices and payroll systems, and handle previously disregarded employees under the transition rule.

Key Provisions

• Authorizes qualified automatic contribution arrangements to terminate prior opt-out elections after one to three years.
• Authorizes eligible automatic contribution arrangements to automatically restore deferrals unless participants opt out again.
• Modifies notice language so employees are told how to participate rather than being offered an indefinite nonparticipation election.
• Clarifies that previously disregarded employees may be treated as employees with prior opt-out elections.
• Applies parallel ERISA automatic contribution arrangement changes and preserves no-inference treatment for prior law.