Mandatory 414(h) "Pick-up" Provisions and Irrevocable Waiver

[Guest mmagidson]

When a sponsor establishes a plan with a mandatory 414(h) provision, I know that an employee can make a one-time irrevocable waiver not to participate and the regs regarding 401(k) plans state that such a one-time election will not be treated a a cash or deferred election. Treas. Reg. 1.401(k)-1(a)(3)(iv). However, in this reg, it states that, amoung other requirements, the waiver must apply to "contributions....... made by the employer on the employee's behalf to the plan and to any other plan of the employer (including plans not yet established) for the duration of the employee's employment with the employer....."

What if the employer adopted a plan in the future requiring no employee contributions? What if the employer amended the original plan to abolish the 414(h) provision?

Am I reading too much into the reg. or is the employee just out of luck for good with that employer?

Does the reg. only apply to future plans with employee contributions?

Thanks to all for the feedback.

[Carol V. Calhoun]

In theory, under the regulations, the election would have to be both irrevocable and made at the first time the employee was eligible to participate in any plan of the employer. However, in recent private letter rulings under I.R.C. § 414(h)(2), the IRS has taken a much more liberal position. (Some of the ones dealing with purchased service credit seem to allow for annual "one-time irrevocable elections.") You might want to check these out.

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