Obama's new changes for your retirement plan

Of course, everyone thinks it’s a smart idea for people to save for their golden years. But now your company’s going to have to take a much more active role in getting them to do it!

IRS just issued a slew of new rulings and procedures on 401(k)s and other retirement plans.

The goal: to increase ways for employees to sock money away.

It’s all part of President Obama’s new plan, Retirement Security for American Families.

Here’s a rundown of the five biggest changes you’re facing.

Change #1: Easier Automatic Enrollment

The surest way to get employees saving for retirement: Don’t give ’em a choice!

Still, especially for smaller firms, the hassles associated with adding an automatic enrollment feature kept them from putting it in place.

Those hurdles are now gone.

Under Obama’s new plan, as long as your company adopts pre-approved automatic enrollment language, you can amend your plan to get that feature in place – no case-by- case IRS green light needed.

Cite: For sample language, click IRS Notice 2009-65, at www.irs.gov/pub/irs-drop/n-09-66.pdf

Change #2: Help with Automatic Contributions

Getting employees saving is one thing. Keeping them contributing is another.

That’s why some companies are embracing features like automatic escalation. Still, a large number of organizations have yet to latch on.

Much of the reason? Confusion over this feature.

To get more firms to offer auto escalation, IRS issued a new ruling explaining how to incorporate it into your 401(k).

Revenue Ruling 2009-30 spells out how employers can work this feature into their plans.

Cite: RR 2009-30, at www.irs.gov/pub/irs-drop/rr-09-30.pdf

Change #3: New features for SIMPLE plans

If your company offers a retirement plan option other than a 401(k), you’re in for changes too.

SIMPLE-IRA plans are particularly attractive to smaller businesses because they’re easier to administer. But auto enrollment wasn’t an option.

No longer. IRS is now allowing interested firms to start auto enrollment in SIMPLE-IRAs.

The only caveat: Employees must have the ability to opt out.

Cite: IRS Notice 2009-66, at www.irs.gov/pub/irs-drop/n-09-66.pdf

And if you want to add an auto contribution feature to your SIMPLE-IRA, you’ll find sample language here: IRS Notice 2009-67, at www.irs.gov/pub/irs-drop/n-09-67.pdf (Again, you’ll get automatic approval.)

Change #4: Rolling Unused Leave into 401(k)s

This next change is a hot issue this time of year: What happens to unused vacation or sick time?

Many employers have adopted a use-it-or-lose-it stance. Others pay folks for their accrued time.

There’s a new option in the mix: Roll that money into a retirement plan, either by doing it for employees or letting them do it themselves.

Cite: For guidance on how to do it, check out Revenue Ruling 2009-31, at www.irs.gov/pub/irs-drop/rr-09-31.pdf

Change #5: Employee Help for Retirement Rollovers

It’s a tough one your Benefits folks likely face: what to do with employees’ retirement savings when they leave your company.

You have new help in explaining choices (and meeting notice requirements): IRS Notice 2009-67. The document offers a simplified “rollover roadmap” to smooth the process.

Cite: Notice 2009-67, at www.irs.gov/pub/irs-drop/n-09-67.pdf

Info: For a complete rundown of the changes, click www.irs.gov/ retirement/article/0,,id=212061,00.html