dropping grace period adding rollover

[Beemer]

I have a client that wants to drop their 2015 grace period, which would carry into 2016 and add a rollover provision. How far in advance do they need to notify participants? Is November 30th too late in the year? Is distributing an SMM sufficient?

Thanks for any replies

[Johearain]

An SMM is sufficient and since this doesn't require a change to your SBC, you're under no obligation to provide the SMM in advance. Under ERISA, you have 210 days from the end of the plan year in which you adopt the amendment to provide the SMM. I would definitely suggest adding the verbiage to your OE communications but you're in no rush to distribute the SMMs. We're doing something similar with our commuter expense accounts this year and for internal operations reasons we just decided to adopt for PY 2016 instead of adopting for this year. But, if your client wants to add the rollover for 2015 funds into PY 2016, they just need to execute the amendment by 12/31 and notify participants with 210 days. The question I would ask is why are they wanting to make this change now, so late in the year? If their reason for doing this is because they want to allow an HCE or KE to rollover funds that s/he would otherwise lose, they may find themselves stuck between the devil and the deep blue sea trying to explain that one if their plan is audited....if this is the case, or if it could even appear this is the case, they need to make certain they plaster that verbiage everywhere they can during OE to lessen the validity of any argument that the plan was amended for the benefit of an HCE or KE...make sure the "little guy" knows he can roll over his unused funds, too.

[Beemer]

OK, thanks.