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Missed Deferral Opportunity - Spans many years


Pam S.

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We recently took over the administration of an existing 401k plan (safe harbor 3% - but was SH match years ago) .  As the actuary was working on the 2017 combined testing and contribution calculation, they noticed that there was an employee with a rehire date in 2017.  Upon collecting the historical employment information, it was determined that this employee should have been allowed to contribute to the 401k plan back in 2009, his first date of rehire (after having met the plan's eligibility during his first employment period from 2/2008 through 9/2008).  No problem there - we can calculate the QNEC for this.  But, the employee then terminates in 2010 and is rehired again in 2012.  And then terminates in 2013 and is rehired again in 2017.  Phew.  So, my question here is when I'm calculating the QNEC, do I have to do separate calculations for each year for which he was rehired?  Or just for the first rehire period and call it good?  Technically, he should have been allowed to defer when he was rehired in September of 2009, and again in July of 2012 and now in 2018 (actually September of 2017).  Any comments on this are appreciated.

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7 minutes ago, Pam S. said:

Any comments on this are appreciated.

It's nice to try to make things perfect, but I'm pretty sure I could find something wrong with just about every plan if I looked hard enough.  I have to question whether your time and/or the client's money is well-spent by looking at 2009 issues in 2018.  I'd clean up anything that we would be directly responsible for, give the client a heads-up about possible problems and ask if they really (really?) wanted to go beyond that and move on.

Ed Snyder

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