Qualified Automatic Contribution Arrangements - QACAs

AAA

DEFINITION of 'Qualified Automatic Contribution Arrangements - QACAs'

Also known as QACAs, these were established under the Pension Protection Act of 2006 as a way to increase workers' participation in self-funded defined contribution retirement plans such as 401(k)s, 403(b)s and 457(b)s. Beginning January 1, 2008, companies that use QACAs automatically enroll workers in the plans at a negative deferral rate, unless they specifically opt-out.

The minimum deferral amount per employee is 3% of his or her compensation for years one and two, increasing by 1% each year. The QACA amount cannot exceed 10% of his or her compensation. QACAs require a minimum employer contribution which can be either a matching or nonelective contribution. Employer contributions can be subject to a two-year vesting period unlike traditional 401(k)s in which employer contributions are immediately vested.

INVESTOPEDIA EXPLAINS 'Qualified Automatic Contribution Arrangements - QACAs'

If a company chooses to adopt a QACA and its defined contribution retirement plan already has an automatic enrollment feature, the employer can choose to have the QACA feature only apply to new employees. Employees must be given adequate notification about the QACA, as well as the ability to opt out completely or to participate at a different, specific contribution level.

RELATED TERMS
  1. Vesting

    The process by which employees accrue non-forfeitable rights ...
  2. Eligible Automatic Contribution ...

    Also known as EACAs, these were created as part of the Pension ...
  3. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt ...
  5. 457 Plan

    A non-qualified, deferred compensation plan established by state ...
  6. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
Related Articles
  1. Taxes

    After-Tax Balance Rules For Retirement Accounts

    Accumulating post-tax assets can work to your advantage. Find out how.
  2. Taxes

    New Retirement Plan Limits For 2011

    New changes to the law can have a huge impact on your nest egg.
  3. Retirement

    3 Reasons To Use An Employer-Sponsored Retirement Plan

    If you aren't participating in your employer-sponsored retirement plan, you're missing out! Learn the benefits.
  4. Taxes

    3 Retirement Account Rules To Know

    Stay up-to-date on regulation amendments to avoid penalties as well as take advantage of new opportunities.
  5. Taxes

    The Basics Of A 401(k) Retirement Plan

    This plan has become one of the most popular retirement options. Find out why.
  6. Savings

    Saver's Tax Credit: A Retirement Savings Incentive

    Here's another reason to put money toward your retirement nest egg.
  7. Retirement

    Voluntary 401(k) Contributions: A Thing Of The Past?

    Contributing to your retirement plan may no longer be voluntary, but automatic enrollment has a number of benefits.
  8. Entrepreneurship

    401(k) Plans For The Small Business Owner

    If you own a business, this may be the plan for you! Find out about its benefits and eligibility requirements.
  9. Budgeting

    8 Reasons To Never Borrow From Your 401(k)

    Find out why dipping into your future savings can have serious consequences.
  10. Retirement

    Is Your 401(k) On Track?

    Small adjustments can have a significant impact on your returns. Learn what to watch for.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center