EACAs

[zimbo]

I have a plan that wants to institute automatic enrollment as of 1/1/2009. They only want it to apply to participants who first become eligible for the plan on or after 1/1/2009.

I believe that such a provision would cause the plan to not be considered an "Eligible" Automatic Contribution Arrangement (EACA) and therefore the plan would not be allowed to offer permissible withdrawls within 90 days for new automatically enrolled participants.

Am I correct in my assumption that an EACA can only exclude those participants who have made affirmative elections as to a contribution percentage (including 0%)? If so, am I correct in saying that a QACA could be limited only to new participants but it would then no longer be an EACA and would therefore not be able to allow the permissible withdrawls described above?

[Tom Poje]

the proposed regs 1.414(w)-1(b)(2) say that to pass uniformitty an EACA is permitted to follow the rules of 1.401(k)-3(j)(2)(iii) without regard to whether the plan will be a QACA.

this sectiion (iii) is the section that pertains to current employees (e.g. those that have made an affirmative election, ot those that have chosen not to have elective contributions made.)

I'd give a strong recomendation to reading the 2nd paragraph for "EACA under section 414(w)" of the preamble to the proposed regs (beginning page 17?)

[zimbo]

Thank you Tom. So, it seems that it is permissible to exempt existing employees who have already made an election for the K Plan (even if that election was NOT to contribute) but it is NOT permissible to limit the automatic enrollment only to employees first eligible after the plan is amended to provide automatic enrollment. The plan would need to subject existing employees who have NOT made an election previously to automatic enrollment in order to be a EACA.

Do you agree with that conclusion?

[Tom Poje]

In regards to that issue, I believe that is correct.

hopefully I can get a chance to re-read some of that stuff again and clear my mind up on some other things.

[Tom Poje]

ok, since I have really been confused between ACA and EACA and QACA

I see the preamable notes (last paragraph on page 10 of the attachment) says the following:

The definition of an automatic contribution arrangement under section 514 of ERISA is generally THE SAME definition of an EACA under section 414(w)(3),(including the requirement must be invested in accordance with regulations prescribed by the Secretary of Labor under section 405©of ERISA, but the definition does not include a notice requirement. HOWEVER, section 415(e)(3) of ERISA requires a notice to be provided to each participant to whom the arrangement applies. As in the case for the notice under section 404©(5)(B) of ERISA, the specific timing and content requirements under section 514(w)(3) of ERISA are generally the SAME as the notice requirements under section 414(w)(4), but the interpretative jurisdiction for the notice is also with the DOL.

so that sounds like there is no seperate animal known as an ACA as oppossed to an EACA. the preamble says they are generally the same! even looking at Corbel's cheat notes of the differences between the two it really looks like there is no difference between the two. the exception being if the ACA is a non statutory ACA - most often this would occur if the plan chooses not to comply with QDIA regulations.

[Guest Sieve]

Tom -- I was reviewing past EACA posts from before I began posting, and came across this string. You & I & others have discussed this issue on another post, but I want to clear up a few things (if possible) since it certainly is a hot topic.

The preamble provision you mention in the above post is a discussion of ACA for preemption purposes, and compares that definition to the definition of EACA for the 90-day return rule. So, the proposed regs' definition of ACA is not intended to apply for general 401(k) purposes (i.e., the auto enrollment provisions of Treas. Reg Section 1.401(k)-1(a)(3)(ii)) but, rather, those regs discuss and define ACA in terms of it being an EACA or a QACA.

Rev. Rul. 2000-8, which first blesses auto enrollment (pre-EACA and pre-QACA), permits auto enrollment to apply to current employees and new hires or to new hires only--something that is not permitted under an EACA unless the current employees have affirmatively elected a 0% deferral. So, apparently, plain vanilla auto enrollment (or, I think under the new lingo, an ACA) IS different for general 401(k) purposes than it is for EACA or QACA purposes, although we still don't have detailed regs under the auto enrollment reg cited above.

Would you agree that there is an animal out there that is "auto enrollment" WITHOUT being subject to the 90-day return rule or safe harbor QACA rules--and that we have very little guidance how that works?

[Tom Poje]

I survived the hurricane Fay.

well, ok, if you mean leaving work early Thursday to avoid the storm

waking up Friday morning to no power and a back porch filling up with water surviving.

a mess everywhere, and that of course is minor compared to the rest of the state.

I suppose the good news will be that 'us folks' will get to file 5500 later tahn normal, etc.

as to your question, I agree there is a mysterious animal out there known as an ACA.

given the fact if you follow certain conditions you can be an EACA (gad why wouldn't you want to just to get the label "Eligible" attached to your plan. Does that imply an ACA is 'not eligible'? maybe like EPCRS and self correction it means something like you have no guarantee of stuff (including the preemption?) if....

At least that is how I am reading it.

Corbel's comparison list has ACA (non-statutory), ACA, EACA and QACA

but if you look at the stuff there really isn't a difference between the ACA and EACA

for ACA it says "90 day withdrawal - Yes if EACA" and "6 month ADP correction - yes if EACA"

but the 90 day withdrawal is optional anyway under ACA, so really the only difference would be the 6 month difference.

[Guest Sieve]

Tom -- The only difference I think might be of interest to an employer relates to the non-statutory ACA not being tied to the universality rule, so that an employer could say "I just want this new-fangled auto enrollment (negative election, ACA, whatever) to apply only to new hires. I don't want to bother my current employees with it." You just cannot do that under the EACA rules (without waivers), but you apparently can do that under the pre-EACA IRS auto enrollment guidance. Or an employer who says "I don't want to give all my employees a Notice concerning this auto enrollment stuff, just the new hires"--again, not possible under an EACA. Maybe that never arises as an issue, but it certainly could. I'd just like to know what it is that we have before we get to an EACA.

Glad you survived Fay physically unfazed! Now, can you survive QACAs?