February 6, 2008

CC:PA:LPD:PR (REG 133300-07)

Internal Revenue Service

PO Box 5203

Ben Franklin Station

Washington, D.C. 20044

Re: Comment Letter on Proposed Regulations Regarding Automatic
Contribution Arrangements

SUPERVALU, INC. welcomes the opportunity to comment on the proposed
regulations published on November 8, 2007 (72 F.R. 63144) regarding
automatic contribution arrangements.

## Who We Are

SUPERVALU, INC. is one of the largest companies in the United States
grocery channel. SUPERVALU currently has approximately 190,000 employees
and annual sales of approximately \$40 billion. SUPERVALU holds leading
market share positions across the U.S. with its approximately 2,450
retail grocery locations. Through SUPERVALU's nationwide supply chain
network, the company also provides distribution and related logistics
support services to more than 5,000 grocery retail locations across the
country, including most U.S. Military base locations in the United
States.

SUPERVALU and its subsidiaries currently maintain several qualified
defined contribution plans which include cash or deferred arrangements
under Code section 401(k). SUPERVALU's main 401(k) plan (the "YES Plan")
has had automatic enrollment since 1999 and covers eligible hourly and
salaried employees (excluding employees acquired when SUPERVALU acquired
Albertson's Inc. in 2006). Over 80% of eligible employees contribute to
the YES Plan. Employees become eligible for the YES Plan after attaining
age 21 and completing at least 250 hours of service in a 90 day period,
at which point they are automatically enrolled to make contributions and
receive a company match of 20%-100% on up to 5% of pay contributed to
the plan (total size of match depends on company success each year).

Since SUPERVALU's acquisition of Albertson's Inc. in 2006, New
Albertson's Inc. (a wholly owned subsidiary of SUPERVALU) sponsors
separate plans for acquired Albertson's employees. The Albertson's
401(k) plan (the "ASRE Plan") covers eligible hourly and salaried
acquired Albertson's employees. Participants in the ASRE Plan make
elective contributions and receive both matching contributions and
non-elective contributions. Nearly 59% of eligible employees make
contributions to the ASRE plan.

## Comments

Early in 2007, SUPERVALU decided to merge the ASRE and YES Plans and add
a qualified automatic contribution arrangement under new Code section
401(k)(13) effective January 1, 2008. SUPERVALU obtained the advice of
outside consultants and providers (including independent outside legal
counsel) regarding the requirements of Code section 401(k)(13) including
how to treat current employees eligible to participate in the plan but
not participating on the effective date of the QACA ("ENPs"). In the
fall of 2007, SUPERVALU amended the Plan to add a qualified automatic
contribution arrangement ("QACA") effective January 1 2008, consistent
with its good faith understanding of those requirements. These changes
were communicated to participants at that time. However, upon the
issuance of the proposed regulations less than two months before the
effective date of Code section 401(k)(13) (and the effective date of
these plan amendments), SUPERVALU learned that its planned treatment of
ENPs would not meet the provisions of the proposed regulations. Now,
SUPERVALU is unable to determine the effect of these plan amendments.

Accordingly, SUPERVALU is directly affected by the provisions of the
proposed regulations. For the reasons detailed below, SUPERVALU hereby
requests (1) that the treatment of ENPs required under proposed
regulations under Code section 401(k)(13) be changed in final
regulations, and (2) that at some point early enough in 2008 to give
employers a reasonable time to react, the Internal Revenue Service issue
relief concerning the treatment of ENPs for employers who adopted a QACA
effective January 1, 2008.

Generally, SUPERVALU commends the Service for the provisions of the
proposed regulations. However, we strongly disagree with the specific
requirement imposed in section 1.401(k)-3(j)(1)(iii) of the proposed
regulations. Under this requirement, a plan that seeks to implement a
QACA under Code section 401(k)(13) must automatically enroll all current
employees as of the effective date of the QACA, with an exception for an
employee who:

> was an eligible employee under the cash or deferred arrangement (or a
> predecessor arrangement) immediately prior to the effective date of
> the qualified automatic contribution arrangement and on that effective
> date had an affirmative election in effect (that remains in effect)
> to---
>
> \(A\) Have elective contributions made on his or her behalf (in a
> specified amount or percentage of compensation); or
>
> \(B\) Not have elective contributions made on his or her behalf.

We believe the requirement that current employees be enrolled
automatically in the absence of an [affirmative]{.underline} election is
inconsistent with sound policy and the provisions of Code section
401(a)(13). Our explanation of this concern is set out below.

## Discussion

Code section 401(a)(13)(c)(iv) specifies the circumstances under which
current employees may be excluded from a QACA, stating that:

> Automatic deferral for current employees not required. Clause (i)
> \[requiring extension of automatic enrollment provisions to all
> employees\] may be applied without taking into account any employee
> who---
>
> \(I\) was eligible to participate in the arrangement (or a predecessor
> arrangement) immediately before the date on which such arrangement
> becomes a qualified automatic contribution arrangement (determined
> after application of this clause), and
>
> \(II\) had an election in effect on such date either to participate in
> the arrangement or to not participate in the arrangement.

Significantly, section 401(a)(13)(c)(iv)(II) does not reference an
"affirmative" election to participate or not participate; rather, the
reference is only to "an election." However, just a few lines above
clause (iv), in Code section 401(k)(13)(C)(ii), Congress articulated the
requirements governing elections out of an automatic enrollment safe
harbor, stating that:

> \(ii\) Election out. The election treated as having been made under
> clause (i) shall cease to apply with respect to any employee if such
> employee makes an affirmative election---
>
> \(I\) to not have such contributions made, or
>
> \(II\) to make elective contributions at a level specified in such
> affirmative election.

Thus, Congress was able to identify circumstances in which an
affirmative election is required, requiring such an affirmative action
in clause (ii) of Code section 401(k)(13)(C), and did not explicitly
require affirmative elections under section 401(a)(13)(C)(iv).
Accordingly, SUPERVALU believes that the requirement of an affirmative
election under Code section 401(a)(13)(C)(iv) is inconsistent with the
statutory language and Congressional intent.

SUPERVALU's position that a provision requiring an "election" under
section 401(k)(13)(iv)(II) does not require an affirmative election is
further supported by earlier positions taken by the Internal Revenue
Service with respect to pre-PPA guidance on automatic enrollment 401(k)
plans. For example, in Revenue Ruling 2000-08, the Internal Revenue
Service concluded that an employee could be treated as electing to
participate in a 401(k) plan even in the absence of an affirmative
election. As noted in 2000-08:

\[A\] cash or deferred election will not fail to be made under a
qualified, cash or deferred arrangement merely because, when an employee
fails to make an affirmative election with respect to an amount of
compensation, that amount is contributed on the employee's behalf to a
trust, provided that the employee had an effective opportunity to elect
to receive that amount in cash. The employee has an effective
opportunity to elect to receive an amount in cash ...if the employee
receives notice of the availability of the election and the employee has
a reasonable period before the cash is currently available to make the
election.

SUPERVALU hereby requests that final regulations under Code section
401(a)(13) not go beyond the terms the Code and the analytic framework
utilized in Revenue Ruling 2000-08 by requiring that an election not to
participate in the plan be an affirmative election.

SUPERVALU recognizes that the Service is trying to accommodate public
policy considerations in maximizing the reach of new automatic
enrollment plans, particularly in light of the value to plan sponsors of
the safe harbor from ADP and ACP testing provided by 401(a)(13).
Accordingly, we would like to suggest a framework for developing an
alternative approach to the "affirmative election" requirement in the
proposed regulations. This framework would follow the approach taken in
Revenue Ruling 2000-08---that current employees must be given an
"effective opportunity" to elect whether or not to participate in a QACA
---and the outcome of such opportunity will satisfy Code section
401(k)(13)(C)(iv) even if the outcome is based on a passive process. For
example, employers could be allowed to:

-   Include specific language in the annual ADP/ACP safe harbor notice,
    stating that the plan will assume eligible non-participants ("ENPs")
    who do not act on their on-going opportunity to enroll after receipt
    of the notice are electing to not participate, or

-   Send a specific communication (such as a postcard) to all ENPs
    reminding eligible employees of their on-going opportunity to enroll
    in the plan, and further stating that the plan will assume that such
    ENPs who do not act on their on-going opportunity to enroll after
    receipt of the communication are electing to not participate.

Through each of these approaches, a plan sponsor should be able to
demonstrate that ENPs have made an election to not participate.

Our request is also prompted by practical considerations.

First, SUPERVALU, along with other employers, does not have the ability
at this point to make the required distinction between ENPs who have
affirmatively elected not to participate and ENPs who have simply chosen
not to enroll in the Plan. Accordingly, under the proposed regulations,
SUPERVALU would be required to automatically enroll ENPs who have
previously affirmatively elected not to participate in the plan.

This concern is further supported by broader prevalence data reflecting
actions by larger employers selecting automatic enrollment designs. As
noted in Hewitt Associates' 2007 survey on Trends and Experiences in
401(k) Plans, 83 percent of employers who implemented automatic
enrollment plans applied the automatic enrollment feature exclusively to
new employees and only 17 percent extended the automatic enrollment
feature to ENPs. This is consistent with findings published by Hewitt in
2005, 2003 and 2001. In effect, employers have overwhelmingly concluded
that ENPs should be allowed to passively opt out of automatic enrollment
programs. We request that the final regulations be revised to allow
employers to continue this approach.

Second, the requirement in the proposed regulations would impose a
serious administrative burden on any employer who has previously adopted
an automatic enrollment feature in its 401(k) plan, and then seeks to
adopt a QACA under Code section 401(k)(13). The proposed regulations
would, in effect, require these employers to re-enroll all employees,
even those who are already participating in the plan by operation of the
pre-PPA automatic enrollment feature. We believe this outcome places a
significant burden on employers who took the initiative to improve
employee savings and penalizes such employers for this initiative. As
with the alternative approaches suggested earlier in this letter to
allow a passively-based process for ENPs, we believe there are a number
of passively-based alternatives that are available to the Service to
enforce 401(k)(13)(C)(iv) without imposing an undue burden on employers.

The position taken by the proposed regulations with respect to ENPs is
particularly problematic for SUPERVALU (and other employers) who wished
to provide a QACA effective January 1, 2008, and as a result, adopted
plan amendments and developed communications and administrative
procedures and began communicating rules before the proposed regulations
were issued in November 2007. Under a good faith interpretation of Code
section 401(k) (13), SUPERVALU concluded that it was not required to
automatically enroll ENPs and, when the proposed regulations were
issued, it was too late in the year to extend automatic enrollment to
ENPs by January 1, 2008.

The position taken by the proposed regulations has served as a deterrent
to SUPERVALU and other employers who may seek to move to a QACA. In
effect, the position taken by the Service in the proposed regulations
will increase the cost to SUPERVALU of adopting a QACA by approximately
\$3-6 million. This is difficult to absorb---especially in retail
environment---and represents a substantial immediate cost. SUPERVALU is
willing to undertake the costs associated with a QACA that requires
automatic enrollment of ENPs, but the cost of such design is far more
tolerable if enrollment of ENPs is phased in gradually (as it would be
under the alternative positions articulated earlier in this letter) and
a gradual phase-in would be less of a barrier to utilization of
401(k)(13) than if it were imposed as an immediate cost.

We would like to emphasize that SUPERVALU's position with respect to
ENPs is not motivated solely by the potential cost to SUPERVALU. It
should be noted that SUPERVALU chose a matching formula that exceeds the
QACA requirements, i.e., a 100% match on the first 4% of pay contributed
and a 50% match on the next 2% of pay contributed. Further, SUPERVALU is
confident that the generous matching formula will move the plan towards
a high participation rate over time, consistent with the past experience
with automatic enrollment in the YES Plan. Also, all eligible employees
are eligible to receive the discretionary profit sharing contribution,
whether or not they contribute their own money to the plan. Both
SUPERVALU and the acquired Albertsons business have a strong tradition
of making profit sharing contributions. Further, although not required,
SUPERVALU has included union associates covered by the plan in the
automatic enrollment process. Of note, out of approximately 150,000
participants in the combined plan, there are over 20,000 union
associates who are fully covered by the plan as their single retirement
vehicle and who are not otherwise covered by a Taft Hartley plan.

For all of the reasons stated above, we hereby request (1) that final
regulations issued by the e Service eliminate the requirement for an
"affirmative" election under Code section 401(k)(13)(C)(iv), and (2)
that at some point early enough in 2008 to give employers a reasonable
time to react, the Service issue relief (perhaps in the form of a
Notice) for employers who adopted a QACA effective January 1, 2008,
indicating that ENPs will not be subject to the affirmative election
requirement in proposed regulations to Code section 401(k)(13)(C)(iv).

If you have any questions or comments, please contact the undersigned at
the telephone number or the electronic mail address provided below.

Sincerely:

David E. Pylipow

Executive Vice President,

Human Resources

SUPERVALU, INC.

<Dave.Pylipow@supervalu.com>

952-828-4930

Cc: Kathryn McIntire

Mike Erlandson

American Benefits Council

[Alternate Contact for Questions]{.underline}

Duane Whitney

<Duane.Whitney@supervalu.com>

952-303-3533