AE Mandate

I have a question as to whether this spin off 401k plan is grandfathered or not for purposes of the mandatory automatic enrollment. Plan adopted a PEO on 2/1/2023. Plan spins out into its own single employer plan on 1/1/24. Is the plan required to adopt the mandatory AE provision under Section 101 of SECURE 2.0? Thank you!

Check the proposed regs issued in January this year and Notice 2024-2 for additional details, but I think your answer is here.

Quote

Q&A A-4 of Notice 2024-2 provides that if a plan that includes a qualified CODA is spun off from a plan that includes a pre-enactment qualified CODA, the qualified CODA included in the new spun-off plan generally is also treated as being a pre-enactment qualified CODA. However, if the plan from which the new plan was spun off was a plan maintained by more than one employer that was established before December 29, 2022, then the qualified CODA included in the spun-off plan is treated as a pre-enactment qualified CODA only if the qualified CODA in the plan maintained by more than one employer was treated as a pre-enactment qualified CODA with respect to the employer sponsoring the spun-off plan.

That is what I had been reviewing. So being that it spun out of a pre-enactment PEO plan by the employer plan was post enactment, what happens in the new spin off? I do not think it is a GF plan - grandfathered plan. Am I reading it incorrectly?

If you meet the conditions of the part that starts "However...plan." than you can continue to be treated as a pre-enactment CODA, if you don't meet the conditions you need to follow automatic enrollment.

Make sure you save all the documentation from the prior plan to substantiate you meed the conditions should a future IRS audit arise and they want to know why you aren't doing auto enrollment. 

Ok I see what you are saying - the PEO was GF so they are ok.

I just re-read the Notice. THis plan joined the PEO after SECURE 2.0 effective date. So I do not think it is GF. Any one else have thoughts?

I agree that if it joined after Secure 2.0, then it does not meet all conditions and is not grandfathered.

Thank you!