QACA Auto Increases - who gets increased, and when?

[Mr401k]

A plan implemented a QACA effective 1/1/2017; prior to then it had a plain old ACA. The QACA auto enrolls at 3%, with 1% increases every January 1. The plan's first auto increases will be 1/1/2018.

1. A participant was already deferring 4% as of 1/1/2017; his rate stayed at 4%. Should that person ever have his deferral rate auto increased? If so, would his first increase be on 1/1/2018, or on 1/1/2019? In other words...since he's already at 4% - the minimum rate for the second period - does he skip a year before being increased?
2. Another participant became eligible 4/1/17, and elected to defer 5%. Would he ever have his rate auto increased? If so, when?

Thanks!

[K2]

It all depends on how you wrote the QACA.  I don't think there's an answer in the law or regs, it's in what the document says.  If the document is unclear, clarify it.

 

[Peter Gulia]

The suggestion in kcbirm’s last sentence often could bring another question:

 

Imagine the plan is stated using prototype or volume-submitter documents; the resulting document states nothing the administrator finds useful to answer questions of the kind Mr Jones asks; and the employer is unwilling to amend the plan because it fears doing so might impair its reliance on the IRS’s approval concerning the documents.

 

How then should the administrator interpret the plan?

[TPAJake]

The Plan should not be silent on this.  However when in doubt, auto-increase.  If you get a fresh election on file every year, this can be avoided going forward because if they fail to return the election, auto-increase.  Never ever violate the provisions of the Document over somebody's 1%, it's not worth it, ask me how I know this.

1--Auto increase 1/1/18 unless you get an positive election to stay at 4%, no skipping years.

2--Auto increase 1/1/18 unless you get an positive election to stay at 5%, no skipping years.

There's a theme at work here as you can see, auto escalation is an elemental part of a QACA.

[K2]

FGC, in that case, the plan admin is responsible for interpreting the document.  They should establish the procedures to implement the ACA and resolve the questions.

 

[Peter Gulia]

kcbirm, we concur that it falls to the plan's administrator to interpret the plan's provisions.

My question is what modes of interpretation does a reader use to resolve the ambiguities and discern what the plan provides?

 

 

[K2]

FGC, I think written administrative procedures are the way to go.  

 

[BG5150]

On 5/3/2017 at 9:09 AM, Fiduciary Guidance Counsel said:

Imagine the plan is stated using prototype or volume-submitter documents; the resulting document states nothing the administrator finds useful to answer questions of the kind Mr Jones asks; and the employer is unwilling to amend the plan because it fears doing so might impair its reliance on the IRS’s approval concerning the documents.

Any prototype or VS should have provisions to address the auto-increase situation.  If it is not clear at the moment, there should be choices under the plan to make it more clear without having custom language potentially taking it out of VS status.

[Mike Preston]

How do you know this?

[BG5150]

Mike, I don't KNOW it.  I guess it's just been in the docs I've been using and figured it would be in all of them.  It would make sense.  There I go applying sense to stuff.

[Mike Preston]

Not you. TPAJake.

[TPAJake]

Several very large EPCRS filings related to auto-escalation failures.  If anybody has ever seen a QACA written to allow the skipping of years, I would be surprised.  I've been wrong before though