auto enrollment and rehires

[K2retire]

A rehired employee who was previously a participant in the plan is rehired. The document requires the person to immediately resume participation in the plan. But the auto enrollment provision that was added to the plan since the participant left requires advance notice. Do you simply offer the option to defer immediately, wait for the expiration of the notice period and then auto enroll them? If so, how do you answer the auditor's question about why the deferral rate is less than the stated percentage for automatic enrollment?

[BG5150]

From ERISA Outline Book (Chapter 3A: Accruing Benefits - Section II (Defined contribution plans):

Part D.2.e. (401(k) plans: automatic enrollment):

2.e.8)a) Reasonable notice periods in the absence of guidance. As noted in 2.e.3)c)ii)

above, the timing requirements prescribed for safe harbor 401(k) plans will be deemed

reasonable for EACAs, and similar rules are provided for QACAs. Thus, furnishing the

notice between 30 and 90 days before the beginning of the plan year (with exceptions for

new plans and newly-eligible employees) meets the “reasonable period” requirement. This

is not to say, however, that 30 days would be a minimum requirement in all cases. In many

cases, automatic enrollment is part of the orientation process for a new employee.

Under the applicable guidelines for safe harbor 401(k) plans, the initial notice can be given to a new

employee up to their eligibility date (e.g., the first day of employment for an employee who

is eligible for a plan with immediate eligibility).

A plan also might provide in the communication materials that, in the event the participant’s plan entry date is less than a

minimum period from the date of the notice (e.g., 30 days), the plan will assume in the

absence of an affirmative election that the participant is electing the automatic enrollment

rate to be effective as of the end of that minimum period, rather than as of the plan entry

date. In other words, if the participant wants to start deferring as of the scheduled plan entry

date, an affirmative election will be needed.

This latter approach, however, might not satisfy the notice requirements for EACAs and QACAs , but should be reasonable at least for a 10

plan that is not being designed to meet either of those definitions.

(spacing mine)

It seems as though the notice can be given when they sign up. And if desired, the plan can wait 30 days to implement it if it's not an EACA or QACA.

[K2retire]

And what do you do if it is a QACA?

[BG5150]

And what do you do if it is a QACA?

I guess I would see what the "new hire" or "new plan" rules are.