automatic enrollment & immediate eligibility

I do have some very generous plans that allow deferrals immediately.  Most concernedly, I have a MEP that allows it - and now we're bringing on our first 10+ employee employer post-12/28/22, so welcome to automatic enrollment.

Amongst all the other issues is timing for the automatic enrollment notices.  Obviously, it's going to be difficult to give the notice before they are eligible.  What is the best solution for implementing it?  It seems counter to the intent to say "Welcome to Company X.  Since we are part of Y's MEP with immediate eligibility, you can elect to defer starting today, your date of hire.  But if you don't make an election, then in 30 days you will be subject to the plans' automatic enrollment provisions as outlined on this notice I'm giving you today."  Is that really the way to go?

Thanks in advance...

What seems incongruous?

The notice Internal Revenue Code § 414(w)(4) calls for is about how someone makes or is deemed to have made one’s cash-or-deferred election.

What you describe goes like this:

A worker, from one’s employment commencement date, is eligible to elect.

A worker always may elect between cash and a deferral.

During the notice period, a worker may elect, impliedly, cash or may elect, affirmatively, a deferral.

After the notice period, a worker may elect, impliedly, a deferral, or may elect, affirmatively, cash.

A worker’s right to elect between cash and a deferral is constant during and after the notice period.

To the extent of differences in whether and when an automatic-contribution arrangement applies, an employer can’t avoid at least some incongruity about which choice results from a worker’s communication or an absence of the worker’s communication.

But Congress set that course.

I'd think the intent was for auto enroll to apply starting with the first paycheck after DOP.

It feels incongruous to say "we will take your non-action as an implied election to defer zero during the notice period... but once the notice period is up, we will instead translate your non-action to a default deferral rate."  The employee has done nothing differently, and this is kicking in later.  I understand that this might be the only functional* interpretation of the reg; it just feels strange.

* "functional" being a relative term; I am not optimistic about a plan sponsor handling this correctly.

A person starts a new job, usually gets various employment forms to review and complete so just add this to the list. Basically, you can make an affirmative election now to enroll or not enroll (defer 0%), and pursuant to this notice, if you fail to make an election you'll be automatically enrolled on X date.

6 minutes ago, AlbanyConsultant said:

I am not optimistic about a plan sponsor handling this correctly.

This is always the concern for any administrative task foisted upon a small business.

It is odd that which choice results from an absence of the worker’s communication turns on whether the noncommunication is during or after the notice period.

Congress could have allowed a plan to provide an implied assent to an elective deferral even before a worker has received the automatic-contribution notice if the notice explains a participant’s right to get a permissible withdrawal and is given with enough time before the end of the period for a permissible withdrawal. That could allow making the implied-assent choice the same for during the notice period and after the notice period ends.

But Congress might have overlooked that idea in the few days of December 2022 in which they legislated SECURE 2022.

And some wonder whether Congress thoughtfully considered the public policy effects of imposing an eligible automatic-contribution arrangement as a tax-qualification condition for new § 401(k) or § 403(b) arrangements, so burdening startup and emerging businesses but not many established businesses.