Can a QACA Provide for Permissible Withdrawals?

[rocknrolls2]

I am working on a new 401(k) plan for a client that will be using the new 401(k)(13) safe harbor and which permits participants to make a permissible withdrawal under Section 414(w). The recordkeeper is pushing back and saying that this is not permitted since that would make the plan an EACA (eligible automatic contribution arrangement) rather than a QACA (qualified automatic contribution arrangement). I feel that a QACA can provide for permissible withdrawals at least in part because the proposed regulations on the timing of furnishing the notice specifically recognizes that a QACA may provide for permissible withdrawals, since they allow such a plan to provide the annual notice to a newly hired employee as late as the date on which s/he commences employment. . Does anyone have any thoughts on this?

[John Feldt ERPA CPC QPA]

PPA preempted State laws regarding deferral withholding without written participant consent. In order for the plan to benefit from that preemption, the plan would have to adopt EACA (I think).

If you don't need that protection, then you could adopt the new safe harbor plan option (QACA) without using the EACA (so you also do not need to have a QDIA). But I don't see any 90 day withdrawal option without being taken into the EACA section.

So, I guess I do not see how a plan can adopt the 90 day "oops - I want my money back" withdrawal provision if it does not adopt the EACA provsions.

Is there a problem with adopting the EACA provisions? Is it the QDIA notice requirement?

[Guest tmills]

A QACA can be an EACA if it meets the few additional EACA requirements like the QDIA and notice already discussed. If it is an EACA, it can have the withdrawal provision. I would think the vast majority of QACAs would also qualify as EACAs.