Delayed Start of Deferrals for entire Plan

[401(k)athryn]

I have a client that implemented a Profit Sharing Plan at the end of 2016.  The plan document was drafted with the addition of a 401(k) and Safe Harbor feature, to be effective February 10, 2017, as this was expected to be the first pay date from which deferrals would be withheld.  The plan sponsor decided to switch platform providers late in the game, requiring all new contract paperwork, and the implementation process in still under way.  Now, the expected deferral start date is May 10, 2017.  Employees had previously been provided with an SPD and Safe Harbor notice referencing the February 10th date as the date on which they could start deferring.

I did not think that we could amend the effective date of the deferrals that was already in a document signed prior to the end of 2016, which left me thinking that this was a deferral failure that was going to be corrected within three months and so I only needed to provide a notice to the employees (there is no match). 

Questions:

1) The notice requirement under EPCRS for the deferral failure must reference deferral percentages that were to be withheld.  Enrollment meetings have not occurred yet so no deferrals have been elected.  So, am I going about this all wrong - is this not the way to correct? 

2) Is it possible to just amend at this point to change the effective date of deferrals and safe harbor to be May 10, 2017 with no additional notice or correction for the employees? 

The thing is, I am sure that this happens ALL the time with start-up plans.  For a multitude of reasons, the plan may be delayed in getting set-up and ready for deferral submissions or enrollment meetings are delayed.  

3)  What do you do in this situation where deferrals don't start on the effective date referenced in the plan document? 

 

Thank you so much!

 

 

[Doghouse]

I had a similar situation a few years ago and remember the conclusion being that I could change the effective date of deferrals if I amended before the first effective date, but not after.