austin3515 Posted February 3, 2011 Share Posted February 3, 2011 True or False: Service can NEVER be disregarded under the rule of parity in a 401k plan, becuase the participant always has a nonforfeitable right to their 401k contributions (even if they never made 401k contributions, and even if they never had a balance in the plan). They always mentioned "Employer provided benefit" but my understanding from somewhereorother (very reliable source!) is that this is a TRUE statement. Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
austin3515 Posted February 3, 2011 Author Share Posted February 3, 2011 Found the answer (EOB)... 2.c.1) Elective deferrals included under rule of parity for post-2005 plan years. Treas. Reg. §1.401(k)-1©(1), as amended on December 29, 2004, provides that elective deferrals are disregarded only for purposes of IRC §411(a)(2). IRC §411(a)(2) addresses only the application of vesting schedules. Thus, these regulations require that elective deferrals be taken into account in determining whether the employee is 0% vested for purposes of the rule of parity. The regulations are effective for plan years beginning on or after January 1, 2006, although the regulations may be applied, at the employer’s election, for earlier plan years ending after December 29, 2004. See Treas. Reg. §1.401(k)-1(g) (December 29, 2004). Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Tom Poje Posted February 3, 2011 Share Posted February 3, 2011 at the 2010 ASPPA Annual Conference the IRS expressed the following opinion Does the rule of parity for vesting permit the disregarding of years of service for a rehired participant who was nonvested at termination in employer contributions but had salary deferrals? What about someone who made no deferrals but could have? If there is a vested amount, prior service cannot be disregarded, even if the vested account is attributable to deferrals. IRC 411(a)(6)© and (D). However, if there is a vested percentage, but no vested amount (i.e., no deferrals made in this example), the rule of parity does permit prior service to be disregarded. it should be remembered, of course that such opinions might not reflect an actual Treasury position, though the IRS personal do look at the questions beforehand. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now