must a plan meet qualification requirements every year? Options

[bamma]

must a plan meet qualification requirements every year? If it isn't tested every year will it automatically be disqualified?

This post has been edited by bamma: Mar 17 2008, 12:58 AM

[Jim Chad]

These are two seperate questions. The answer to the first is:Yes, all qualification requirements must be met every year.

The second question about testing and disqualification is a little tougher to answer. I can't understand what "automatic disqualification" means. There are some things that if the IRS finds on an audit they would start talking about disqualifying the plan. But hopefully a cure could be worked out to prevent disqualification.

Can you clarify your question?

[bamma]

I guess I'm asking if there any exceptions such as safe harbor plans that avoid yearly testing?

[JanetM]

Safe harbor plans avoid testing by following many other requirements. They only get pass on ADP and maybe ACP - depends on the plan. Not sure I understand your question. Are you asking if plans must pass all coverage and non discrimination tests annually? The answer is yes, with the exception that some safe harbor plans can avoid some of the test, but not all.

[Tom Poje]

for example, read the first sentence of 1.410(b)-2(a)
"A plan is a qualified plan for a plan year ONLY if the plan satisfies section 410(b) for the plan year"
or from the code
401(k)(3)(A)
A cash or deferred arrangement shall not be treated as a QUALIFIED cash or deferral arrangement unless...