Timing of Auto Enrollment Required Notice

[Guest kudler]

Hi,

Does anyone know the site (i.e., ERISA Section, IRC Section or Reg) that explicitly defines "within a reasonable period before each plan year" for a standard Automatic Contribution Arrangement (ACA) plan or an Eligible Automatic Contribution Arrangement (EACA)?

Reg Section 1.401(k)-3(d)(3)(ii) defines "reasonable period" for a QACA safe harbor notice. Do the ACA and EACA terms refer to the safe harbor notice requirements because of similar language in the Code?

Thank you, in advance.

[Tom Poje]

EACA rule is as follows. I don't believe any specific number of days is mentioned for an ACA, simply 'reasonable time' [see ERISA 514(e)(3)], though I'd wager since the regs are pretty specific as to the definition of reasonable, that ACAs would follow similar guidelines.

§ 1.414(w)-1(b)(3)

(iii) Timing —(A) General rule. The timing requirement of this paragraph (b)(3)(iii) is satisfied if the notice is provided within a reasonable period before the beginning of each plan year or, in the plan year the employee is first eligible to make a cash or deferred election (or first becomes covered under the automatic contribution arrangement as a result of a change in employment status), within a reasonable period before the employee becomes a covered employee. In addition, a notice satisfies the timing requirements of paragraph (b)(3) of this section only if it is provided sufficiently early so that the employee has a reasonable period of time after receipt of the notice in order to make the election described under paragraph (e)(2)(i) or (e)(2)(ii) of this section.

(B) Deemed satisfaction of timing requirement. The timing requirement of this paragraph (b)(3)(iii) is 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 employee covered under the automatic contribution arrangement 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 to make a cash or deferred election (or becomes covered under the automatic contribution arrangement as a result of a change in employment status) 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 to make a cash or deferred election (or becomes covered under the automatic contribution arrangement as a result of a change in employment status), and no later than the date that affords the employee a reasonable period of time after receipt of the notice to make the election described under paragraph (e)(2)(i) or (e)(2)(ii) of this section. If it is not practicable for the notice to be provided on or before the date specified in the plan that an employee becomes eligible to make a cash or deferred election, the notice will nonetheless be treated as provided timely if it is provided as soon as practicable after that date and the employee is permitted to elect to defer from all types of compensation that may be deferred under the plan earned beginning on that date.

[Guest kudler]

Thank you very much. I suppose that's what happens when you (meaning me) work with old regs (2008) - I miss the site. Thanks again, Tom.

[Guest W Waldan Lloyd]

So let's stir the pot a little. Suppose the employer has a basic safe harbor plan (with graded match up to 4% for 5% deferral), but has modified it to provide auto increases up to 5%. Employer has given a conforming and timely notice for the 2010 plan year, but has now decided to provide auto-increases to 6% and 7% for NHCEs only with a corresponding additional .5% match for each 1% increment above 5%. The employer would like to start this effective 1-1-2010. Of course, the notice given did not mention this additional match. If the employer gives a new notice now and amends the plan before year end will the safe harbor status of the plan be affected? The new match and auto-increase are in excess of what is required for safe harbor and will be available only to NHCEs. Seems to me the regs only deal with the timely notice needed to validate a safe harbor formula, not an additional benefit. Couldn't the employer adopt this change and give notice at any time? On the other hand, since the change was not described in the timely notice and the reg requires the notice ot describe "any other contributions under the plan . . . and the conditions under which such contributions are made;" would amending the plan now invalidate the notice and prevent the employer from providing the additional auto-increase and match?