QACA Maybe?

[Brenda Wren]

Starting up a new qualified plan in 2008 and client is undecided at this point if he wants to commit to the 3% safe harbor. However he does like the idea of automatic enrollment and he likes the idea of a 2-year vesting schedule if he does later commit to the safe harbor 3%.

Is anyone aware of anything in the current regulations that would probibit a "maybe" notice with a QACA?

[John Feldt ERPA CPC QPA]

Yes, I think you can provide a maybe notice to inform participants that safe harbor provisions might be adopted for 2008, even if it's the QACA safe harbor plan. You'll have to have the auto-enroll feature in place at the beginning of the year though I would guess. This just my opinion, I did not spend any time looking this up at this time. This would only work with the 3% nonelective SH.

[JanetM]

Maybe I am missing the point. Why 3% SH NEC for the QACA. QACA already passes ADP/ACP because you provide the required match (100% on 1% and 50% on next 5%).

Why not just add discretionary profit sharing? You could require 6 years vesting for profit sharing contributions. Make the profit sharing formula integrated to SSWB and the employer gets the most.

[Kimberly S]

With a QACA plan you can choose to do a non-elective contribution instead of the match. I can't imagine why anyone would do both.

I think J4FKBC's comment was intended to suggest that the match would not be appropriate in the case of a "maybe" notice because the absence or presence of the match stands to influence the particpants' deferral choices.

[John Feldt ERPA CPC QPA]

Kim, you are correct. Yes, Janet, perhaps my point was not effectively made.

There are 2 types of New SH plans starting 1-1-2008, the QACAs (polly wanna QACA?):

1) the 3% nonelective QACA - not a match - yes you get the 2-year cliff vesting for the SH nonelective contribution, and you must satisfy the automatic enrollment rules

2) the QACA match: 100% on 1% plus 50% on the next 5% - yes you get 2-year cliff vesting for the SH match and you must satisfy the automatic enrollment rules