The IRS offers guidance to individuals on saving for the future and selecting a retirement plan. These initiatives include:

• Expanding automatic retirement plan enrollment opportunities
• Simplifying saving of tax refunds
• Instructing employees on saving payments received in lieu of unused vacation or other leave time in their retirement plan
• Assisting employees and employers understand both tax-favored rollover and other plans, and retirement plan options

Automatic Retirement Plan Enrollment Opportunities

The IRS and U.S. Treasury Department have issued “guidance” on expanding automatic enrollment for 401(k) and SIMPLE IRA plans. These expanded opportunities are:

• Revenue Ruling 2009-30 shows how an employer offering a 401(k) plan can include automatic contribution increases in its plan
• Notice 2009-65 provides sample text for automatic enrollment rules that employers with 401(k) plans can adopt with automatic IRS approval
• Notice 2009-66 assists small businesses add automatic enrollment rules to their SIMPLE IRA plans
• Notice 2009-67 offers sample text for automatic contribution rules that employers with a SIMPLE IRA plan can adopt with automatic IRS approval

Simplifying Saving of Tax Refunds

For the 2010 tax year, the IRS will provide taxpayers the opportunity to convert their tax refunds into U.S. “I” Savings Bonds, even without a bank account or existing U.S. Treasury account. This option will be available through a simple check box on the tax return form.

In the future, taxpayers will be allowed to effortlessly purchase “I” Savings Bonds for their children or grandchildren.

Saving Payments Received in Lieu of Unused Vacation or Other Leave

The IRS allows taxpayers who receive cash in lieu of unused vacation or other leave time either annually or at termination to save these payments through contributions to retirement plans. Both the IRS and U.S. Treasury have issued the following guidance on this matter:

• Revenue Ruling 2009-31 discusses the conversion of payments received in lieu of unused annual leave time into retirement plan contributions (for a defined contribution plan), whether defined as employer or elective 401(k) contributions
• Revenue Ruling 2009-32 discusses the conversion of payments at employment termination received in lieu of unused leave time into retirement plan contributions (for a defined contribution plan), whether defined as employer or elective 401(k) contributions

Rollover Retirement Distributions into IRAs or Other Plans

The IRS has issued guidance to inform taxpayers of their options in saving lump sum payments from retirement plans by making a “roll-over” into an IRA or other qualified retirement plan.

• Notice 2009-68 gives taxpayers a “Roll-over Roadmap” that fulfills the notification requirements to employees withdrawing their retirement assets. The notice also simplifies the overall presentation of the taxpayer’s options when taking a distribution eligible for a roll-over, informs the taxpayer of any changes in the relevant laws and explains special situation rules.

Understanding Retirement Plan Options

The IRS website provides additional information for employers to understand retirement plan options and how to select the optimal plan for their business. The IRS publication “Life Events That Can Affect Retirement Savings” offers information on major situations and events that have an effect on an individual’s retirement plans, including starting or leaving a job, and contributing for past years. The “Retirement Security for American Families” fact sheet, dated September 5, 2009, provides additional information on the IRS’ retirement and savings initiatives.

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