Missed Mandatory Automatic Enrollment - not in document at all

The calendar year end 403(b) plan in question is required to have the mandatory automatic enrollment provision as of 1/1/2025, as per SECURE. That is not in question. The question is how to correct a failure under EPCRS.

The plan document did not include an automatic enrollment provision, and participants have not been automatically enrolled. There is no match contribution. 

A retroactive corrective amendment to add the provision, effective as of 1/1/2025 seems appropriate. 

And then analysis for a missed opportunity to defer - specifically a failure to implement an automatic contribution feature. 

Does it then follow that the plan can rely on the on the reduced QNEC provided in Rev Proc 2021-30 Appendix A part .05(8)? 

"(8) Special safe harbor correction method for failures related to automatic contribution features in a § 401(k) plan or a § 403(b) Plan. (a) Eligibility to use safe harbor correction method. This safe harbor correction method is available for certain Employee Elective Deferral Failures (as defined in section .05(10) associated with missed elective deferrals for eligible employees who are subject to an automatic contribution feature in a § 401(k) plan or § 403(b) Plan (including employees who made affirmative elections in lieu of automatic contributions but whose elections were not implemented correctly). If the failure to implement an automatic contribution feature for an affected eligible employee or the failure to implement an affirmative election of an eligible employee who is otherwise subject to an automatic contribution feature does not extend beyond the end of the 9½-month period after the end of the plan year of the failure (which is generally the filing deadline of the Form 5500 series return, including automatic extensions), no QNEC for the missed elective deferrals is required, provided that the following conditions are satisfied:

(i) Correct deferrals begin no later than the earlier of the first payment of compensation made on or after the last day of the 9½-month period after the end of the plan year in which the failure first occurred for the affected eligible employee or, if the Plan Sponsor was notified of the failure by the affected eligible employee, the first payment of compensation made on or after the end of the month after the month of notification;
(ii) Notice of the failure that satisfies the content requirements of section .05(8)(c) is given to the affected eligible employee not later than 45 days after the date on which correct deferrals begin; and"

This seems like an aggressive interpretation of the correction options but I am open to being swayed that it others think it is perfectly reasonable and not aggressive at all. 

What say all of you? 

If the plan was not established before December 29, 2022 (or the plan’s elective-deferral arrangement began on or after December 29, 2022), the plan is neither a governmental plan nor a church plan, and neither the new-employer nor the small-employer exception applies:

Are you sure there is, for tax-treatment purposes, a plan-document failure? If the plan provides an automatic-contribution arrangement because the employer presumes it will amend, retroactively, the written plan to meet Internal Revenue Code § 414A’s tax-treatment condition, shouldn’t such an amendment be within Congress’s (SECURE 2022) and the IRS’s remedial-amendment period?

IRS, Miscellaneous Changes Under the SECURE 2.0 Act of 2022, Notice 2024-2, 2024-2 I.R.B. 316, 332-333 (Jan. 8, 2024), at Q&A-J1., https://www.irs.gov/pub/irs-irbs/irb24-02.pdf.

thank you @Peter Gulia thoughtful insight as usual. I will mull it over, but I think can be on board with the argument that it is within the remedial amendment period. 

Why do I get the feeling this is happening for hundreds and hundreds of plans...

Many § 403(b) plans lack a service provider that’s obligated to inform the charity about a perception or suspicion that the plan’s elective-deferral arrangement does not meet § 414A.

I agree with Peter that, from a plan document standpoint, an amendment to require mandatory automatic enrollment is likely within the remedial amendment period. However, because this is a mandatory requirement for plans that do not satisfy the grandfather rule or are church or government plans, there is an operational aspect to this that would require correction. Effective for the 2025 plan year, automatic enrollment should have been implemented for the plan's participants. For that, it would make sense to provide qualified nonelective contributions allocated to the accounts of participant who were not already making elective deferrals to the plan in the amount of the missed deferral opportunity, as per Rev. Proc. 2021-30.

On 11/17/2025 at 6:03 PM, justanotheradmin said:

Does it then follow that the plan can rely on the on the reduced QNEC provided in Rev Proc 2021-30 Appendix A part .05(8)? 

This particular provision has actually expired:

Quote

(d) Sunset of safe harbor correction method. The safe harbor correction method described in section .05(8) is available for plans only with respect to failures that begin on or before December 31, 2023.

However, SECURE 2.0 sec. 350 codified essentially the same correction method into law at IRC sec. 414(cc). See also Notice 2024-02 section I, which gives further guidance, including how to apply 414(cc) to terminated participants.

My observation was only about what tax law tolerates for when the § 414A-needed automatic-contribution provisions must be stated in what tax law imagines as “the” written plan.

Among the conditions of the legal fiction of the remedial-amendment period is that “the plan or contract is operated as if such [delayed, but retroactive] plan or contract amendment were in effect[.]” SECURE 2022 § 501(b)(2)(A).

So, a plan’s administrator must administer the plan according to the administrator’s prudent assumption about what the later-amended plan is deemed to have provided retroactively.

If that didn’t happen, pursue corrections.

For a convenient reference to C.B. Zeller’s pointer, my note above cites Notice 2024-2 and gives the particular hyperlink. (Because the IRS ended printing the weekly Internal Revenue Bulletins, https://www.irs.gov/irb is the official source.)

This is not advice to anyone.