Qualified Automatic Contribution Arrangements (QACAs)
Candlefocus EditorQualified automatic contribution arrangements (QACAs) are a form of automatic-enrollment retirement plan that employers offer as an opt-out plan to their employees. This plan automatically enrolls the employee with a matching contribution, unless the employee chooses to leave the plan. QACAs are designed to encourage employees to save for their retirement and make saving easier.
QACAs have certain "safe harbor" provisions in place that exempt them from actual deferral percentage (ADP) testing. This testing is otherwise needed to ensure that employers follow the guidelines set forth by IRS regulations. The QACA must contain a schedule of uniform minimum default percentages that must start at 3% and increase with each year the employee participates in the plan.
Additionally, employees may choose at any time to increase or decrease their contribution percentage, as long as they are allowed to opt-out at any time. This allows employees the flexibility to decide their contributions while also taking advantage of their employer's matching contribution.
Overall, QACAs are a valuable retirement investment plan that employers can offer their employees. This plan allows employees to save for retirement and make saving easier. With the safe harbor provisions and flexibility, QACAs help employees with their retirement planning while also taking advantage of their employer's mutal matching contribution towards their retirement.