LTPT AAAARRRRRGGGGHHHHH!!!

So, aside from the fact that IRS guidance is badly needed (anyone heard any rumors of app. date?) I have the following item for general thoughts...

If your employers are like many of ours, it is an absolute given that many will screw this up (no matter how much we try to tell them) and will NOT immediately allow deferral opportunities to some people who qualify under the LTPT rules.

So, has anyone heard rumors of any special correction for some of these situations, or will it simply fall under the "normal" EPCRS correction procedures? We're not looking forward to the potential corrections for missed deferrals, some (many?) of which we won't find out about until sometime in 2025...

I'm always more pessimistic on Mondays.

We're assuming the normal EPCRS "missed opportunity" rules will govern - and are trying to impress on our clients that 1) corrections can be costly; and 2) we "think" most won't elect to defer, so you'll be making QNECs for people who didn't want to defer (given the opportunity) and generating lots of small balance accounts...

In the TE/GE regional conference in August, an individual from the IRS commented that they expect to release LTPT guidance in December - maybe.  The audience immediately reacted that this would be too late given the 1/1/2024 effective date, a reaction that was met with the comment that it is the best that the IRS can do.

In response to a follow-up question if a plan has classification exclusions that are not service-based, would the LTPTs be excludable under that classification.  The IRS reaction was that type of exclusion could be used to discriminate against LTPT employees.

On the surface, employers may be faced with the prospsect of allowing an individual who is an LTPT in an excluded classification to elect deferrals where, if that individual was not an LTPT, would be excludable and could not elect deferrals because of that classification!

From the perspective of implementation, a plan with a large number of LTPTs will need to communicate by December 1 to LTPTs the ability to make elective deferrals and any other related benefits (like a match if the company is no inclined).  A plan with fewer LTPTs may be able to push this to December 15.  That's 2 1/2 to 3 months from today.

Belgarath, it seems to me there are two layers of difficulties:

1.     For at least some plans, there are ambiguities about exactly what the 2019 and 2022 statutes set as ERISA title I’s command and the Internal Revenue Code’s tax-qualification condition. With its adviser’s help, the decision-maker needs to decide its interpretations so one can discern the plan’s implied provisions, including those put in operation under a remedial-amendment regime.

On this difficulty, an adviser might help by providing her advice about the range of permissible, plausible, and practical interpretations, and the range of probabilities about whether an interpretation later would be found to have been used in good faith with reasonable cause.

If a client needs or wants that advice before the IRS has released guidance, an adviser does what she can with the information available when she finishes her advice.

2.    For a plan that faces no ambiguity or has (at least temporarily) resolved it, there remains a difficulty that the employer/administrator might fail to administer the plan’s implied provisions.

Against that difficulty, there might not be much for an adviser to do beyond explaining the plan’s implied provisions and the whole range of potential consequences of not administering them.

Query (and I ask this not knowing the practical world in which the LTPT problems live):

Is it feasible for a plan administrator’s summary plan description, summary of material modifications, or similar communication however labeled (sent to might-become-eligible employees) to describe the elective-deferral opportunity and who’s eligible for it, and by doing so shift a responsibility to the employee?

Whether an employee meets eligibility under the plan’s general conditions or the LTPT conditions, perhaps ERISA § 102 does not require the plan’s administrator to tell an employee that she met the conditions and has become eligible (if the needed information about the eligibility conditions was previously communicated in an SPD or SMM). (I’m aware there are some nice questions about whether ERISA § 404(a) in some circumstances requires more communication than ERISA’s part 1 requires.)

I’m aware some administrators (typically through a service provider’s work) furnish something to remind an employee that she met (or is about to meet) a service condition and has become (or soon will become) eligible to elect for or against elective deferrals. But perhaps ERISA § 102 does not command that courtesy.

For a plan with no automatic-contribution arrangement, isn’t it the participant’s responsibility to affirmatively elect elective deferrals?

If so, might an employer/administrator be responsible for an omission of elective deferrals only if the employer refused or neglected to process the employee’s submitted wage-reduction agreement?