Rev Proc 2015-28 notice requirements

[WCC]

RE: Rev Proc 2015-28 section .02

Plan sponsor uses an automatic enrollment feature. Plan has 5 participants who should have been enrolled at eligibility but were not. Three months later plan sponsor finds they were not enrolled and subsequently enrolls them.

Plan sponsor does not provide notice to employees as noted in section .02(1)(b). Does failure to provide the notice automatically require the sponsor to use the 50% correction method for the missed enrollment periods?

Thank you

[Belgarath]

IMHO, probably yes.

You might be able to argue that you could use the 25% correction in .03(2), which provides that it may be used "....(or the conditions for the safe harbor correction method described in section 3.02 or 3.03(1) are not met by the Plan Sponsor)."

So, you didn't meet those conditions. Now, as part of this 25% correction, a notice is required as well, again not later than 45 days after the date on which correct deferrals begin, so technically, you probably aren't allowed to use the 25% correction. But you might be able to assert that as long as you give a notice at the point you institute the 25% correction, this would suffice. It seems ridiculous that you can use the 25% correction if you have done nothing whatsoever, but that you can't use it just because you started up the deferrals and forgot a notice.

This argument is a stretch, I know - and I don't know that I'd attempt to use it unless I was actually doing a VCP filing and arguing for the 25% correction. But it's all I can come up with.

[panther]

I agree with Belgarath.  It seems to me that the notice would be sufficient if given within 45 days after the corrective contribution was made but that is technically not what the Revenue Procedure says.  We have the same situation and are deciding what to do.  The employer is cautious and likely will do the 50% QNEC just to be safe.  Words matter.

[austin3515]

Please note that EPCRS has been re-written as Revenue Procedure 2016-51, fyi (I think original posts pre-dated its release)