204h notice - do I need for exclusions?

[Jakyasar]

Hi

2 scenarios:

Scenario 1:

DB plan covers a group of employees (group A) but the sponsor wants them excluded effective 1/1/2027. Coverage is not an issue.

Do I need to provide them a 204h notice? I was planning to state group A is excluded as of 1/1/2027 in the amendment rather than stating group A's new formula is 0%.

I do not see any difference as it is a reduction in benefit and it should have a 204h notice either way. Never did it this way before.

Scenario 2:

DB plan states HCEs are excluded and all participants received the SPD stating it.

3 years down the road, a non-HCE participant becomes an HCE and no longer receives an accrual, just vesting. Does this participant need a 204h notice? There is a no separate grouping with 0% in the definition of groups, just an exclusion in the eligibility section.

Thank you

[Effen]

Scenario 1, definitely "yes"

Scenario 2, I think "no", since there is no "plan amendment" that caused the reduction.  That said, in order to avoid an HR problem, I would urge the sponsor to tell them, but I don't think they have a legal obligation to do so. 

What happens if they become a NHCE again?  Do they get accruals again, or one HCE then always excluded?  

 

[CuseFan]

Agreed, @Effen is spot on - (1) yes on 204(h) w/o a doubt; (2) no, since there was no amendment that resulted in the reduction of future rate of accruals.

[Jakyasar]

Agreed with both and thank you.

To answer Effen's question, if they become an NHCE, accruals will resume as exclusion is specific if and only if an HCE.