RPF M2 U2 Plan Entry and Participation Flashcards
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What is the difference between eligibility and participation?
Eligibility refers to meeting the requirements to join a plan, while participation means actually becoming a member of the plan.
How is the date that an eligible employee enters into the plan determined?
The entry date is defined by the plan document and can occur annually, semiannually, quarterly, monthly, or immediately after eligibility.
What information does the employer need to provide to the employees during the enrollment process?
Employers must provide a Summary Plan Description (SPD), investment information, and other plan notices.
What is an Entry Date?
The date upon which an eligible employee becomes a plan participant, defined by the plan document.
What is the statutory plan entry date?
The earlier of the first day of the plan year following the completion of eligibility requirements or six months after completing those requirements.
What is the latest statutory entry date permitted for an employee who meets eligibility requirements?
An employee must become a participant no later than the statutory plan entry date, which is the earlier of the first day of the next plan year or six months after meeting eligibility.
What must be included in the Summary Plan Description (SPD)?
The SPD must describe eligibility, contributions, account allocations, fees, vesting, and participants’ rights under ERISA.
What is the purpose of the enrollment process?
To provide eligible employees with information about the plan and gather necessary information from them.
What is a Qualified Default Investment Alternative (QDIA)?
A fund where participant contributions are deposited if they do not make an investment choice.
What is the requirement for plans established after SECURE 2.0?
They must utilize automatic enrollment effective with the 2025 plan year, with exceptions for small employers.
What must participants be notified of regarding automatic enrollment?
Participants must be informed of the automatic enrollment amount and their options to change or opt out.
What is the role of the plan administrator in relation to the SPD?
The plan administrator may require participants to sign an acknowledgment of receipt of the SPD.
What is the difference between participant-directed and trustee-directed plans?
Participant-directed plans allow participants to make investment decisions, while trustee-directed plans have the trustee making those decisions.
What is a Safe Harbor Notice?
A notice provided to newly eligible participants detailing the plan’s safe harbor status and contributions.
What information must be provided to participants regarding fees?
Participants must receive disclosures about fees that may be paid from the plan.
What is the requirement for plans allowing rollovers?
They must provide a rollover contribution form or online instructions.
What are the different methods for administering the enrollment process?
The process can vary from in-person meetings with HR to online or IVR applications.
What is Yolanda’s responsibility as the employer sponsoring the plan?
Yolanda must ensure the plan remains qualified by informing employees of their eligibility and providing required notices.
What is the difference between eligibility and participation?
Employees become eligible for the plan once they meet eligibility requirements for age and service. While in some plans people may become participants as soon as they meet eligibility, in many others, the plan only allows eligible individuals to enter the plan at certain times of the year, on entry dates. Once the individual enters the plan, the individual is a participant.
How is the date that an eligible employee enters into the plan determined?
Each plan specifies when the employee will enter the plan after meeting eligibility requirements. Participants will enter the plan on the first entry date following them satisfying the eligibility requirements. Common entry dates are semiannually, quarterly, monthly, or immediately. The law also places a statutory maximum by which time eligible employees must be entered into the plan.
What information does the employer need to provide to the employees during the enrollment process?
For plans that allow employee deferrals, a salary deferral election form must be provided. Participants must also be given investment information, and, if the plan allows for participant-directed investments, forms, or online instructions for selecting investments. Other information provided includes fee disclosure, a beneficiary designation form, and a copy of the SPD. Depending on the provisions of the plan, the sponsor may also need to provide a rollover contribution form, safe harbor notice, or automatic enrollment notice.
Where can I find more information on plan entry and participation?
For more information on plan entry and participation, see:
Retirement Topics – Automatic Enrollment: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-automatic-enrollment
