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new plan safe harbor match comp when plan eff 1/1, 401k eff 7/1


TPApril

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Plan was signed 6/1, with effective date 1/1, but 401(k) effective 7/1. Since plan started mid-year, actual 401(k) and safe harbor match are based on compensation from 7/1.

Plan defines compensation for all purposes to be full year compensation.

This leads to two initial questions:

  1. If 401(k) wasn't even available for the earlier period, is it possible to use full year compensation?
  2. this would apply equally along the way to new participants who enter mid-year

Nice thing for those receiving contributions is they would be receiving greater contributions with full year compensation.

Thank you

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I'd make sure of how the plan spells out its compensation for allocation purposes.  You're mentioning safe harbor is based on post-7/1 earnings, but also saying the plan uses full year for all purposes.

(As in, check specifically whether there is indeed a source-specific definition restricting the safe harbor amount.  I've seen it both ways, where you completely mimic the 401k source, versus mimicking non-elective source definitions.)

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Yes it's possible to use full year compensation.

On mid-year entry, it would depend on your definition of compensation and whether or not preparticipation compensation is included or excluded.

Lastly is the match defined as "per payroll" or "annual"?

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Kind of a similar question.  New 401(k) plan adopted in Spring 2019.  Effective 1/1/2019.  401(k) 3% Safe Harbor provision effective 7/1/2019.  The plan does not exclude pre-participation compensation. 

1. First, as written, the document seems to provide that the 3% safe harbor covers pay for the entire 2019.  Is this ok?   I assume so.

2. Second, a participant who was eligible as of the plan effective date of 1/1/2019 terminates 2/28/2019.  Must he get the 3% safe harbor for his 2 months of pay, or is he ineligible because he terminated before the effective date of the safe harbor provision?

Thanks for any help.

 

 

 

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