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We are setting up Auto Enrollment (4%) plan with Auto Escalation (1% annually up to 10%). When we looked at plan demographics we noticed that close to 40% of participants have elected flat dollar deferral elections instead of percentages. How would administrator auto escalate someone with flat dollar deferral election? Here are a few options we have considered. Divide pay period deferrals by the pay period comp and increase the flat dollar amount by calculated 1% if needed. This approach would potentially hurt folks with variable comp through the year, who want to ensure max deferral (402g limit) and not losing any match (match is calculated with per pay period comp). Exclude anyone who has elected flat dollar deferrals from Auto Escalation. Wondering if that would be considered definitely determinable in accordance with Regulation §1.401-1(b)(1)(ii) and uniform for EACA rules. Currently Top choice if prior sentence holds. Only apply Auto Escalation for participants who have not made any affirmative elections. However, that would only limit this entire plan provision to the future new hires, who never make elections. I would like to hear your thoughts and comments. Are there any other approaches you have seen that you would like to share? Thanks!

It is possible to apply an automatic escalation feature to non-ACA participants? In other words, can a sponsor automatically escalate participants that have made an affirmative deferral election? Plan sponsor wants to have an ACA (at 3%) with an escalation provision of 1% per year up to 8%, but also wants to auto-escalate participants who have elected to defer less than 8% by 1% every year till they hit 8%. Example: Participant affirmatively elects to defer 2% on July 1st, sponsor wants to auto-escalate this participant to 3% on the following January 1st. To me this is like an having a new auto-enrollment date every year for participants that have made an affirmative deferral election, however, instead of being autoenrolled at 3%, they just get increased by 1%. Part II: Does the escalation of non-ACA participants feature need to be in the plan document, or can this simply be an administrative policy and be described in the enrollment form? Our Volume Submitter document is not well suited to incorporating this feature as the only auto-escalation language is tied to the auto-enrollment feature. Part III: Must a participant be able to elect out of the auto-escalation feature? Is there a way to avoid allowing a non-ACA participant to opt out of auto-esclation? Believe me, I would never recommend this feature to a sponsor, but as you know, some sponsors are a lot smarter than the rest of us. Any insights would be appreciated.