delayed start of ACA

[cpc0506]

I have a new start up plan that was profit sharing only for 2012 and added salary deferral with ACA effective 1/1/13. Document was signed 12/20/12.

We learned today that there have been no enrollment meetings as the open platform alliance and advisor have dropped the ball. The client would like to change the document to have the ACA and deferral be effective 4/1/13. Can this be done?

If no change is made to the document, how does the 'brief period of exclusion provision' apply to this plan?

[ETA Consulting LLC]

You've failed to allow individuals to defer when eligible. If you enroll them now, they would have more than 9 months in order to catchup those missed amounts. There shouldn't be an makeup contributions because there is enough time for those individuals to defer a little more in order to make up for that missed opportunity.

Good Luck!

[BG5150]

So, git 'er done BEFORE April 1.

What's the correction for a missed ACA if there's more than 9 months left?

[Kevin C]

There's a little more to it. There isn't a corrective deposit needed for the salary deferrals, but there is a correction needed for the match. You will want to refer to the Rev. Proc. for the details.

[ETA Consulting LLC]

So, git 'er done BEFORE April 1.

What's the correction for a missed ACA if there's more than 9 months left?

There is no "clear" guidance, but judgment may be applied differently. I'd argue that it's all relative; if you have enough time left before the end of the year to make up the missed oppornuity, then no corrective deposit would be necessary. Since there is no clear guidance, this would be debatable. Suppose you miss deferrals for one week in October. Obviously, there isn't 9 months left in the year; however, there are 9 weeks left. I think the 9 to 1 ratio of weeks remaining to make up weeks missed would be a compelling argument that there is enough time to allow each participant to make additional deferrals necessary in order to make up the missed amounts. Especially when you have 9 months to make up 3 months; a 3 to 1 ratio.

With that said, KevinC makes an important point; you have to account for the match that would've been provided had the deferrals been made. If you have an annual calculation, then there should be no issue (as the match wouldn't have been missed). But you should account for match as well as deferrals.

Good Luck!