Part III. Administrative, Procedural, and Miscellaneous

Adding Automatic Enrollment to Section 401(k) Plans — Sample Amendments

Notice 2009–65

I. PURPOSE

This notice facilitates automatic enrollment by providing two sample plan amendments for sponsors, practitioners, and employers who want to add certain automatic contribution features to their § 401(k) plans. Sample Amendment 1 can be used to add an automatic contribution arrangement to a § 401(k) plan. Sample Amendment 2 can be used to add an eligible automatic contribution arrangement described in § 414(w) of the Internal Revenue Code (permitting 90-day withdrawals) to a § 401(k) plan.

II. BACKGROUND

Rev. Rul. 2000–8, 2000–1 C.B. 617, provides guidance on automatic contribution arrangements in § 401(k) plans, and under § 1.401(k)–1(a)(3)(ii) of the Income Tax Regulations, the default that applies under a § 401(k) plan in the absence of an employee’s affirmative election can be for the employer to make elective contributions to the plan on the employee’s behalf.

Under § 1.401(k)–1(e)(2)(ii), a § 401(k) plan must provide an eligible employee an effective opportunity to make (or change) a cash or deferred election at least once during each plan year, and whether an eligible employee has an effective opportunity is determined based on all the relevant facts and circumstances, including the adequacy of notice of the availability of the election, the period of time during which an election may be made, and any other conditions on elections.

Section 902 of the Pension Protection Act of 2006, Public Law 109–280 (PPA ’06), added §§ 401(k)(13), 401(m)(12), and 414(w) to the Code and amended §§ 411(a)(3)(G) and 4979 to facilitate

automatic contribution arrangements in qualified cash or deferred arrangements under § 401(k). Final regulations under these Code sections were published in the Federal Register on February 24, 2009 (T.D. 9447, 2009–12 I.R.B. 694 [74 F.R. 8200]). Section 1107 of PPA ’06 provided generally that any plan amendment made pursuant to PPA ’06 can be made as late as the last day of the first plan year beginning on or after January 1, 2009 (2011 in the case of a governmental plan).

III. SAMPLE PLAN AMENDMENTS

In General . Two sample plan amendments are provided in the Appendix that sponsors, practitioners, and employers (“plan sponsors”) can adopt or use in drafting individualized plan amendments. Because each amendment is a sample amendment, plan sponsors are not required to adopt either amendment verbatim. In fact, it may be necessary for plan sponsors to modify the chosen amendment to conform to their plan’s terms and administrative procedures.

Time and Manner of Adoption . Plan sponsors who want to add one of the sample amendments to their § 401(k) plans must adopt the chosen amendment by the later of (1) the end of the plan year in which the amendment is effective, pursuant to the deadline to adopt a discretionary amendment as provided in § 5.05(2) of Rev. Proc. 2007–44, 2007–2 C.B 54; or (2) if applicable, the deadline under § 1107 of PPA ’06 for adopting an amendment made pursuant to PPA ’06. Pursuant to § 5.06(1) of Rev. Proc 2007–44, a later deadline may apply to a governmental plan. The timely adoption of the chosen amendment must be evidenced by a written document that is signed and dated by the employer (including an adopting employer of a pre-approved plan). However, regardless of when the amendment is adopted, the proper notice describing the features of the plan as amended must be provided to employees affected by the amendment within

a reasonable period before the amendment is effective.

Effect on Reliance . The adoption of either sample plan amendment (as modified, if necessary to conform to the plan’s terms and administrative procedures) will not result in the loss of reliance on a favorable opinion, advisory, or determination letter. Also, the Service will not treat the adoption of one of the amendments as affecting the pre-approved status of a master and prototype (“M&P”) or volume submitter plan. That is, such an amendment to an M&P plan that is adopted by an employer will not cause the plan to fail to be an M&P plan. Similarly, such an amendment to a volume submitter plan that is adopted by an employer will not cause the plan to fail to be a volume submitter plan.

Format of the Sample Amendments . The format of the sample plan amendments generally follows the design of pre-approved plans, including all M&P plans, that employ a “basic plan document” and an “adoption agreement.” Thus, the sample plan amendments include language designed for inclusion in a basic plan document and language designed for inclusion in an adoption agreement to allow the employer to select among options related to the application of the basic plan document provision. Sponsors of plans that do not use an adoption agreement should modify the format of the chosen amendment to incorporate the appropriate adoption agreement options in the terms of the amendment. In such case, the notes in the adoption agreement portion of the sample amendment should not be included in the amendment that will be signed and dated by the employer.

DRAFTING INFORMATION

The principal author of this notice is Roger Kuehnle of the Employee Plans, Tax Exempt and Government Entities Division. Questions regarding this notice may be sent via e-mail to RetirementPlanQuestions@irs.gov .

2009–39 I.R.B. 413 September 28, 2009

Appendix

Sample Amendment 1

Article [ ] Automatic Contribution Arrangement