EACA - Increase Default Percentage

Client has an existing EACA.  Plan is a calendar year plan.   The EACA provisions state that all ees who make an affirmative election remain covered under the EACA. 

Question 1:  Mid Year increase

Am I correct that making this change mid year would cause the ACA to no longer qualify as an EACA?

Question 2:  Previously defaulted EEs

Let's assume for the sake of Question 1 that they are going to wait until 1/1/2022 to make the change, and assuming the document does not state specifically, is it permissible for the previously defaulted ees to remain at the old default rate? 

Or, because all ees are still covered under the EACA, would they need to be increased to the new default rate to avoid a conflict with the "Uniformity Requirement"?

Thanks very much.

<Bump> This unanswered question needs some love 😄

This discussion is opposite of your question #2. We obtained an opinion from an ERISA attorney and he agreed with the recordkeeper that the uniformity rule had to apply to everyone, there could not be two separate groups at different default rates. Not sure if that is helpful to you. 

The automatic contribution increase can take place in the middle of a plan year for an EACA.  The default contribution rates for those who do not affirmatively elect otherwise must meet the minimum 3% / 4% / 5% / 6% rates listed in the regulation, but eligible employees may get to those levels sooner than required.  To make this amendment mid-year, the plan likely will need to provide updated safe harbor notices to participants.

On question #2, I also am skeptical that you could do that without violating the uniformity rule.

Thank you very much for the responses. 

I also asked an ERISA attorney after posting.  The response that I received was that a mid year change would risk losing EACA status, and agreed with you both that keeping the prior defaults at 3% would violate the uniformity rule.  He suggested that the only way to do so would be to amend the plan to have the EACA only cover new participants, which means no 90 day withdrawals for any defaults prior to the amendment and no 6 month testing window.

Why does the plan have the EACA?  Do a lot of people take advantage of the 90-day withdrawal window?  Do they really need an extra 3 months to do their ADP refunds?

There are a few permissible withdrawals a year, and no they probably do not need the extra 3 months but I want them to know all of the consequences involved in whatever they decide to do.