Dougsbpc Posted June 24, 2015 Share Posted June 24, 2015 Sorry, this was originally posted to the wrong category. A calendar year 6 participant cross tested 401(k) plan fails 401(a)4. The plan has a 1 year eligibility requirement. To make the plan pass, an ineligible employee was brought in, given a contribution and made 100% vested through a corrective amendment. Once he is made eligible through the corrective amendment, is he then eligible for all other plan purposes or does he need to wait until when he would have entered? Normally he would not enter until 1/1/16. Thanks Link to comment Share on other sites More sharing options...
austin3515 Posted June 24, 2015 Share Posted June 24, 2015 I don't see why you can't make him eligible solely for profit sharing for 2014, and then only again when and if he satisfies eligibility. Participation is not a protected benefit. Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Kevin C Posted June 25, 2015 Share Posted June 25, 2015 You referred to the amendment in the past tense, so I assume it has already been adopted. The wording of the amendment will determine if the person is still an active participant as of 1/1/2015. Participation is not a protected benefit but the conditions for receiving a contribution are protected after those conditions have been met 1.411(d)-3 Q&A 1(d). So, unless the plan has a last day requirement, you may have a problem using another amendment to prevent him from getting a 2015 contribution. If I read your situation correctly, the amendment, instead of increasing allocations for current NHCE participants, makes a short service ineligible employee a participant who receives an allocation. Does anyone know if the IRS would consider this similar enough to the situation in their short service memo to be a concern? K2retire 1 Link to comment Share on other sites More sharing options...
Dougsbpc Posted June 25, 2015 Author Share Posted June 25, 2015 Thanks for the replies. In re-reading the actual amendment, it is made clear that the amendment is only applicable for the 2014 year. I don't believe this would relate to the short service memo. In this case, the plan had passed 401(a)4 for many years. It just happened that recent personnel changes caused it to fail. I could see short service being a problem if the plan was designed to always fail or if there was a pattern of bringing in only short service employees year after year. Link to comment Share on other sites More sharing options...
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