Failure to notify employees of 401k plan's Entry Dates

[Guest mmacer]

I am looking for any documentation regarding the legal consequences if an employer does not notify their employees of their Plan's entry dates. Would this fall under the SPD notification? Thank you.

[jaemmons]

Did the employer provide them with enrollment materials for them to decide whether or not to defer? Delivery of an SPD can be delayed up to 90 days after they become an eligible participant. Therefore, "SPD notification" does not eliminate the need to provide the employee with proper enrollment information. Normally, an eligibility notice is provided to an employee, especially in a 401(k) plan, outlining what they will need to do, in order to start deferring into the plan. Although this notice is not a requirement under ERISA, it is becoming more of a standard (as well as prudent) practice in the 401(k) industry, in order to eliminate an of these types of issues.

Assuming they didn't, according to your thread, and the employee was eligible to defer, you are looking at a self correction under the VCS program (Rev Proc 2001-17) under EPCRS. Using the correction method outlined in this Rev Proc., the employer would make a QNEC in an amount equal to the average ADP for the employee's group (either an HCE or NHCE). Plus, if they were eligible for any matching contributions on those amounts, they would have to deposit a QNEC in an amount equal to the ACP for the same group.

This is the standardized correction method under 2001-17, but you may use another correction method, so long as it reasonable. (i.e.-use actual deferral rates/$ amount elected on enrollment form for employee)

[david rigby]

Link to Rev. Proc. 2001-17

http://www.benefitslink.com/IRS/revproc2001-17.shtml