IRS Flurry of Releases
Rev. 09/18/09; E-mail Alert 2009-15

The Obama administration is promoting retirement and savings. To do so, the IRS has issued a flurry of guidance to make saving and choosing a retirement plan easier by:

• Expanding opportunities for automatic enrollment in retirement plans,
• Making it easier to save tax refunds,
• Showing how employees can save payments they would receive for unused vacation or other similar leave in their retirement plan
• Helping employees and employers understand their: tax-favored rollover and other savings options and retirement plan design options.

Automatic Enrollment –
In addition to the final regulations issued last February for QACAs and EACAs, to boost participation in 401(k) and SIMPLE IRA plans. The Treasury and IRS have issued the following guidance on automatic enrollment as part of the retirement and savings initiatives:

• Revenue Ruling 2009-30 demonstrates ways a 401(k) plan sponsor can include automatic contribution increases in its plan.
• Notice 2009-65 provides sample plan amendments for adding an automatic enrollment feature to a 401(k) plan.
• Notice 2009-66 includes guidance to help small employers add automatic enrollment to their SIMPLE IRA plans.
• Notice 2009-67 provides sample automatic contribution language that a SIMPLE IRA plan sponsor can adopt with automatic IRS approval.
• Automatic Enrollment Plans for Small Employers, New Employer Brochure on Automatic Enrollment

Receive Your Tax Refund as U.S. Savings Bonds –
For the upcoming 2010 filing season, with a simple check of a box, taxpayers will be able to convert their income tax refunds into I Savings Bonds - even without a bank account or an existing account with Treasury. In future years, taxpayers will be able to purchase I Bonds for their children or grandchildren just as easily.

Save Payments You Would Receive for Unused Vacation or Other Similar Leave –
Many employees receive substantial cash payments for unused vacation or other similar leave at termination of employment or even annually during employment. The Treasury and IRS have issued the following guidance on contributions in lieu of leave:

• Revenue Ruling 2009-31 addresses annual contributions of payments employees would receive for unused vacation or other similar leave to an ongoing defined contribution plan, whether as employer contributions or elective 401(k) contributions.
• Revenue Ruling 2009-32 addresses similar contributions at termination of employment.

Roll Over Retirement Distributions into IRAs or Other Plans –
A key risk to lifetime savings is when an employee spends his or her lump sum payment, instead of electing to roll over the payment to an IRA or other retirement plan.IRS rollover chart.

• Notice 2009-68 introduces two model 402(f) notices (one for designated Roth and one for the other sources being distributed) for eligible rollover distributions.

• Notice 2009-75 describes the tax consequences of rolling over an eligible rollover distribution from a qualified plan to a Roth IRA.

Understanding Retirement Plan Options
IRS.gov has made it even easier for employers to understand their tax-favored retirement plan options and to choose the right plan for their employees as well as their business.

Life Events that Can Affect Retirement Savings provides more information on major life events that can affect your retirement planning like starting a job, terminating employment and catching-up on contributions for missed years of opportunity.

IRS Retirement Plan Navigator