Auto enroll safe harbor

[rlb64]

Plan year is calendar year. Is it absolutely too late to start a qualified auto enroll plan on 1/1 for an existing 401k plan?

[John Feldt ERPA CPC QPA]

If you believe that you are giving the required notice within a reasonable period of time before the beginning of the plan year, and if the IRS ever audits the issue and they also agree that timing of the notice included a reasonable period of time before the beginning of the year, then you are okay.

Obviously, the deemed "okay" timing is 30 days - the IRS cannot question the timing of a notice given 30 days before the beginning of the plan year.

So, is giving the notice today reasonable (27 days instead of 30)? Maybe. When is the first payroll in 2008 and what is its cutoff date for salary deferral changes? I would think that those are relevant factors. But no guarantee now that December 2nd has passed.

This can be found at 1.401(k)-3(d) as shown:

1.401(k)-3(d) Notice requirement

(1) General rule. --The notice requirement of this paragraph (d) is satisfied for a plan year if each eligible employee is given notice of the employee's rights and obligations under the plan and the notice satisfies the content requirement of paragraph (d)(2) of this section and the timing requirement of paragraph (d)(3) of this section. The notice must be in writing or in such other form as may be approved by the Commissioner. See §1.401(a)-21 of this chapter for rules permitting the use of electronic media to provide applicable notices to recipients with respect to retirement plans...

(3) Timing requirement

(i) General rule. --The timing requirement of this paragraph (d)(3) is satisfied

if the notice is provided within a reasonable period before the beginning of the plan year

(or, in the year an employee becomes eligible, within a reasonable period before the employee becomes eligible). The determination of whether a notice satisfies the timing requirement of this paragraph (d)(3) is based on all of the relevant facts and circumstances.

(ii) Deemed satisfaction of timing requirement. --The timing requirement of this paragraph (d)(3)

is deemed to be satisfied if at least 30 days (and no more than 90 days) before the beginning of each plan year

, the notice is given to each eligible employee for the plan year. In the case of an employee who does not receive the notice within the period described in the previous sentence because the employee becomes eligible after the 90th day before the beginning of the plan year, the timing requirement is deemed to be satisfied if the notice is provided no more than 90 days before the employee becomes eligible (and no later than the date the employee becomes eligible). Thus, for example, the preceding sentence would apply in the case of any employee eligible for the first plan year under a newly established plan that provides for elective contributions, or would apply in the case of the first plan year in which an employee becomes eligible under an existing plan that provides for elective contributions.

I hope this helps!

[Tom Poje]

lets look at it from a different point of view. lets say you have issued the notices and everything else this year and next year rolls around and you don't issue notices. does the plan cease to be a qualified auto enroll - or would you say "its too late to be auto enroll for next year?" NO. of course the IRS may frown on things to a greater degree if its the first year of the plan...

in fact, (at least if the notice works the same way as for safe harbor plans) if the document has been amended (or will be amended) before the begining of the year you have such a plan. at that point in time, you have a failure to follow the terms of the document - namely issuing notices - which, at least in regards to safe harbor 401ks the IRS has said is correctable under EPCRS by issuing notices (though if the safe harbor was a match they haven't explained how to correct)

as was noted in the previous comment, 30 days is deemed reasonable. I myself wouldn't push things, especially the first year of the plan.