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Eligible Automatic Contribution Arrangement (EACA)

An EACA is a type of Automatic Enrollment plan created by the Pension Protection Act. See Code Section 414(w)(3) (text below). Automatic contributions to an EACA can be "unwound" (i.e., distributed) if the employee opts out of the EACA within 90 days of automatic enrollment. Employees must be given notice that they will be automatically enrolled in an EACA before the first contribution is made. An EACA (or other automatic enrollment plan) which also satisfies a design-based safe harbor for nondiscrimination testing is called a QACA.

Impact of WRERA

WRERA dropped the requiredment that an EACA must invest in a QDIA if a participant makes no election. It also clarifies that deferrals are not included in 402(g) limit calculations if they are withdrawn in the 90-day opt-out period.



IRC Section 414(w)(3)

ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGEMENT- For purposes of this subsection, the term `eligible automatic contribution arrangement' means 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(c)(5) of the Employee Retirement Income Security Act of 1974, and

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