Tax Tid-Bits

Automatic Contributions Still Qualify 

Without Affirmative Election

The IRS has concluded that automatic contri-butions made to a 401(k) plan for employees who did not elect either to make the contributions or to receive the contributions as cash can still qualify as elective contributions under Reg. 1.401(k)-1(g)(3).

Employers automatically contribute 3% of compensation to the plan for new employees who fail to specify a contribution amount or who do not affirmatively elect to receive all contributions as cash. Upon being hired, employees receive notification of the automatic contributions.