If you’re transitioning an existing qualified automatic contribution arrangement (QACA) 401(k) plan over to Guideline from another provider, there are specific processes you’ll need to follow to ensure your plan is converted properly.
Here are several FAQs to help you understand QACA conversion plans and assist you with the process.
What is a QACA 401(k) plan?
QACAs are a type of 401(k) plan that includes automatic-enrollment with automatic-escalation for eligible employees along with a safe harbor feature. Like other auto-enrollment plans, QACA provisions typically increase 401(k) participation and help employees save more for retirement.
What is a conversion 401(k) plan?
A conversion plan refers to Guideline clients that have an existing 401(k) plan with a different service provider and are transferring their plan to Guideline as their new service provider.
What is a plan participant census and why do I need to share it with Guideline?
A census provides us with each of your participants’ personal and 401(k) information, so we can complete important plan-related tasks, such as properly importing their data, sending participants required notices, and filing your plan’s Form 5500.
Each QACA plan can be set up a little bit differently, and we need to know your prior plan’s details to ensure a smooth transition and to avoid any compliance issues.
To assist, we’ve provided directions below on where you can find your prior plan’s details and how to fill out the census for Guideline.
Where can I find my prior plan’s details?
In order to start your plan with Guideline, you must work with your prior 401(k) provider to obtain the QACA conversion and census information. Depending on your provider, this information may be available on your plan sponsor dashboard, the contribution or deferral report, or even through your payroll provider. If you have questions on where to find this information, we recommend reaching out directly to the provider’s customer support team.
What are the steps to fill out the participant census?
Personal and demographic info
Please fill out the personal and demographic information for employees (existing and terminated) with current 401(k) account balances, as well as eligible employees with balances of 0.
Wage type
What it is: Shares the type of wages an employee or owner receives. W2 means the employee receives a salary, whereas self-employed income applies to those who report earnings on a K1 or Schedule C and are not part of an S-Corporation
How to fill out the census: Enter W2 or self-employed income
Election type
What it is: Shares how a participant is currently enrolled in the plan. Self-elected means the participant manually enrolled and set their own deferral rate (also known as an affirmative election). Auto-enrolled is when an employee is automatically contributing due to auto-enrollment. You can learn more about auto-enrollment here.
How to fill out the census: Enter either self-elected or auto-enrolled.
Pre-tax deferral
What it is: The participants current pre-tax employee contribution amount
How to fill out the census: Enter a percentage or a dollar amount and include units % or $ for each participant so deferrals can be set correctly. Due to QACA requirements, all participants that are auto-enrolled must have a value of at least 3% for this column. For self-employed individuals, elections must be set to 0; they can set up owner’s draws within their dashboards.
Roth deferral
What it is: For Roth contributions; self-elected only. Note: if your plan includes Roth automatic deferrals, please reach out to your onboarding coordinator to determine next steps.
How to fill out the census: Enter a percentage or a dollar amount and include units % or $ for each participant so deferrals can be set correctly. Only participants marked as self-elected should have Roth deferrals.
First year of auto-escalation (only if plan has auto-escalation)
What it is: With automatic escalation, participants who have been automatically enrolled (and have not elected their own deferral rate) will have their deferral rates increased on an annual basis until a certain percentage has been reached.
To meet QACA standards, deferrals must increase to at least 6% but can go as high as 15%. While there is flexibility in setting the automatic escalation schedule, Guideline plans must meet the following minimums each year:
Year 1: 3%
Year 2: 4%
Year 3: 5%
Year 4: 6%
For plans with a starting deferral rate of 6%, auto-escalation is not required. Additionally, if a participant makes an affirmative election, the auto-escalation will no longer apply.
How to fill out the census: Required only if your plan has automatic increase for auto-enrolled participants. Provide the first plan year that the participant deferral rate was/will be automatically increased. If the participant has not been automatically increased yet, this can be a future date.
Where can I find additional QACA information?
If you’d like to learn more about QACA, please review these helpful resources: