auto enrollment failure

[Earl]

Participant was supposed to be auto-enrolled 4/1/2014 but was not.

Participant self-enrolled in June 2014.

Between June and December Participant deferred the 402g limit.

Is this person still due a QNEC?

I don't find anything specific in the Rev Proc other than "failure to timely implement", which this was, so I think he is due the QNEC.

Thanks for any insight/help.

[EBECatty]

I think this section from Appendix A of EPCRS, section 0.2(a)(ii)(B) may help:

The missed deferral for the portion of the plan year during which the employee was improperly excluded from being eligible to make elective deferrals is reduced to the extent that (i) the sum of the missed deferral (as determined in the preceding two sentences of this paragraph) and any elective deferrals actually made by the employee for that year would exceed (ii) the maximum elective deferrals permitted under the plan for the employee for that plan year (including the § 402(g) limit). The corrective contribution is adjusted for Earnings.

[EBECatty]

I think this section from Appendix A of EPCRS, section 0.2(a)(ii)(B) may help:

The missed deferral for the portion of the plan year during which the employee was improperly excluded from being eligible to make elective deferrals is reduced to the extent that (i) the sum of the missed deferral (as determined in the preceding two sentences of this paragraph) and any elective deferrals actually made by the employee for that year would exceed (ii) the maximum elective deferrals permitted under the plan for the employee for that plan year (including the § 402(g) limit). The corrective contribution is adjusted for Earnings.

Sorry, that should be Appendix B, section 2.02(a)(ii)(B), although a similar concept is in Appendix A, section 0.5. That should get you where you need to go, but if not, I'd also take a look at Rev. Proc. 2015-28 to see if any of the new safe-harbor rules apply.

[Earl]

Seems to me that Appendix B relates to improper exclusion of an employee not failure to auto-enroll. Employee was timely given chance to defer and took no action until late in the year. I don't see how Appendix B would cover failure to implement auto-enrollment.

2015-28 Section 3 would be the closest I can find and I don't see any mention of an off-set. I think Section 3.03(2) applies which covers both failure to implement auto-enrollment and, separately mentioned, improperly excluded employees. (Separately mentioned makes me think App. B really does not apply.) 2015-28 modified App A but not App B.

I don't see anything supporting a reduction to limit the QNEC + actual deferrals to the 402g limit.

[EBECatty]

Setting aside possible relief under 2015-28, isn't the "failure to auto-enroll" the same as a "failure to implement" an elective deferral? The employee was deemed to make a deferral election on 4/1/2014, but the employer didn't implement the election. My understanding is that's the whole logic behind 2015-28: If the employer is forced to make a 50% QNEC for failing to implement auto-enrollment, the employer is less likely to use an auto-enrollment feature.

If you have a typical "missed deferral opportunity" under Appendix A, section 0.5(2)(b), you still have to limit the 50% QNEC so you don't exceed 402(g):

"The employee’s missed deferral amount is reduced further to the extent necessary to ensure that the missed deferral does not exceed applicable plan limits, including the annual deferral limit under § 402(g) for the calendar year in which the failure occurred."

I'm not sure the intent of a missed deferral QNEC would ever be to allow the participant to be allocated 150% of the 402(g) limit in a year.