IRS Issues Guidance on Notice 2020-86


On December 9, 2020, the IRS issued Notice 2020-86 to provide guidance on several provisions of the SECURE Act. The clarifications include:

QACA Overview and Guidance

A qualified automatic contribution arrangement (QACA) is a type of safe harbor plan under which eligible employees are automatically enrolled. Unless employees elect otherwise, their contributions increase each year, up to a maximum percentage of compensation. Section 102 of the SECURE Act increased that maximum amount to 15%, which, under prior law, had been 10%.

Notice 2020-86 clarified that the increase to 15% of compensation is not mandatory, but is a maximum ceiling on automatic deferrals. If the percentage is applied uniformly, however, the maximum automatic contribution can be less than 15%.

The Notice also clarified that plans that incorporate the maximum contribution percentage by reference will be deemed to have increased the maximum contribution percentage as of the first plan year after December 31, 2019, unless such plans adopt an amendment before the end of the 2022 plan year.

Mutual of America prototype plan documents with QACA arrangements do not incorporate the maximum deferral percentage by reference and will not be deemed to have increased to a maximum of 15%. If plan sponsors wish to amend their plans to increase the maximum percentage to 15%, they should contact their Mutual of America representative.

Annual Notice Requirements

Prior to the SECURE Act, all safe harbor plans were subject to annual notice requirements. The IRS clarified that Section 103 of the SECURE Act eliminated the safe harbor notice requirement for QACA plans and other plans that satisfy the safe harbor conditions with a nonelective contribution.

While some employers may no longer be required to send an annual notice, this does not eliminate the annual notice requirements completely. The notice is still required for a plan that uses nonelective safe harbor contributions if the plan also provides for an additional non-safe harbor matching contribution. Further, a safe harbor plan can reserve its right to reduce or eliminate nonelective contributions during the plan year only by furnishing a notice before the beginning of the plan year.

In any case, plan sponsors may continue to provide an annual notice to participants in a safe harbor plan, even if doing so may no longer be required by the plan.

Amending Plans for Nonelective Contributions

The SECURE Act permits a plan to be amended after the beginning of a plan year to provide that the safe harbor nonelective contribution requirements will apply for the plan year, provided that:

 • The amendment is adopted, in general, before the 30th day before the close of the plan year.
 • The plan did not provide, at any time during the plan year, for safe harbor matching contributions.


If you have any questions on this or other aspects of the SECURE Act and its related notices, please contact your local Mutual of America representative.

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