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How can I change the effective date of plan


ERISA13

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I am setting up a new plan that we originally were going to use 10/01/08 as the effective date. Since the employer currently maintains a SIMPLE IRA for 2008 we need to change the effective date to 01/01/2009. The plan docs have already been processed with the 10/01/08 date. No contributions have been accepted or anything I just need to change the effective date. I have looked for an amendment form to make the change but have not had any luck.

I would appreciate any guidance. I'm new at this. Thanks!

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If all you have is signed plan, toss it and start over. If you have set up trust and have trust agreement and all that stuff you will need to recind those in writing too.

JanetM CPA, MBA

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Before you toss the old one, was there a 401k safe harbor notice provided for 2008 promising company contribution equal to 3%-of-pay for 2008?

By processed, does that mean the plan documents with the 10/1/08 date were signed?

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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If you have set up trust and have trust agreement and all that stuff you will need to recind those in writing too.

Hi Janet,

I'm curious why you recommend scrapping the trust. It's not unusual for the tax-exempt organization to be created long before the plan takes effect and becomes operational, or for it to retain legal existence after the plan has terminated.

Please understand that I'm not disagreeing with you. You might have some information that I lack, and I'll benefit by learning from you.

Best regards,

Lori

Lori Friedman

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Since you can't have both a 401k and SIMPLE in the same year, you have to "undo" the adoption. I understand you can set up trust before you adopt a plan, but no trustee I have worked with would set up trust months before the plan is effective.

No safe harbor notice was given - must note we are all assuming that this new plan is SH 401k.

JanetM CPA, MBA

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Good point, JanetM. If this happens to be a DB plan or a MPPP--or any plan with a fixed contribution obligation--there would likely be major problems with scrapping it and starting over. It would, in JanetM's vernacular, be FUBAR.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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I understand you can set up trust before you adopt a plan, but no trustee I have worked with would set up trust months before the plan is effective.

We've touched on a matter of differing perspectives. I work entirely in the multiemployer universe, where it's not unusual for a trust to be created months (sometimes, even a year or more) before the plan is effective.

I always learn something interesting from you, whether it's benefit plans or roller coasters. ;)

Lori Friedman

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Well, I'd like to learn something, to. How is it that you can ignore a corporate action taken to establish a plan or ignore the document as not being in existence--especially if a trust was set up?

I would take a different route. Under the regs (&, I think, some early rev ruling or something), there is no plan for a plan year unless (i) employees are informed of it, (ii) a trust is set up under state law, and (iii) there is a written document--all before the end of the year (see, in general, Treas Reg. Section 1.401-1(a)(2)). In that case, the plan just ceases to exist. I would make sure (i.e., perhaps, just hope) that one of these did not happen, and then let the "plan" die a natural death. I don't know how you can do these things, however, and then un-do them.

But, on a more practical note, the establishment of a plan is not the problem for an existing SIMPLE. It is making contributions to the plan. (See IRC Section 408(p)(2)(D)(i): "An arrangement shall not be treated as a [sIMPLE IRA] for any year if the employer . . . maintained a qualified plan with respect to which contributions were made, or benefits were accrued . . ." (emphasis added).) So, just don't contribute to the plan for 2008 (I assume the plan is a PSP, with discretionary contributions), and you're ok.

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* * * Under the regs (&, I think, some early rev ruling or something), there is no plan for a plan year unless (i) employees are informed of it, (ii) a trust is set up under state law, and (iii) there is a written document--all before the end of the year (see, in general, Treas Reg. Section 1.401-1(a)(2)).

What is meant by a trust being set up under state law? Under most (maybe all) state laws, a trust is not set up until the trustee is holding something for a beneficiary. This corpus requirement does not, however, have to be met until after the first plan year has ended and the employer makes its first funding of the plan. Rev Rul 81-114, IRB 1981-15, 7. So having a signed trust instrument that meets the trust requirements of state law other than having a corpus would satisfy #(ii).

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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You are correct. That, too, is my understanding. I simply was mentioning the 3 things that have to occur by year end for a plan to exist, so that the absence of any one of those (if applicable in the OP's instance) would invalidate the plan for that year (which is a potential hoped-for result).

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It is a Safe Harbor (match) 401K Profit Sharing Plan. The employees have not been notified of the new plan yet. However, next week the Investment Advisor has an enrollment meeting scheduled and we plan to give out the Safe Harbor notice at that time as well. So would we be fine to leave the Effective date as 10/01/08 (since there has not been any contributions made) and go ahead and give out the Safe Harbor notice next week for next year's funding. We do have in the plan doc a special effective date for deferrals as 01/01/09.

Thanks everybody for your help!

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