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Posted

A Plan became an Eligible Automatic Contribution Arrangement (EACA) under IRC 414(w) effective January 1, 2015. The plan document states that only employees hired after January 1, 2015 are covered employees under the EACA.

Several years later, the plan sponsor determines that they now want to amend the plan document effective October 1, 2018 to change the covered employees under the EACA to be all employees that do not have an affirmative deferral rate election. This is sometimes referred to as a lookback or sweepback. As a result of the lookback, employees that were hired prior to January 1, 2015 and who have never made an affirmative deferral rate election will now become covered employees and enrolled at the plan's default deferral rate.

It does not appear that Treasury Regulation 1.414(w)-1(b)(3)(iii)(A) directly addresses the EACA notice requirement for the those who will receive their initial EACA notice as a result of the lookback . When must employees impacted by the October 1, 2018 lookback receive their initial EACA Notice?

1) Within a reasonable period of time prior to the beginning of the 2018 plan year (ie - in November, 2017). If this is the correct interpretation, it virtually eliminates mid-year lookbacks to EACA's as the decision by the plan sponsor to implement a lookback won't be made by that time.

OR

2) Within a reasonable period of time prior to the date that the employees with no affirmative deferral rate election become a covered employee under the EACA (ie - within a reasonable period of time prior to October 1, 2018).

Posted

Do the rules for full-year EACA apply here?  I know it's in place already, but only for part of the population.  Can you add more people mid-year?

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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