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Dual Plan Provisions, need experts advice


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While work a plan I have notice that Deferral & Match eligibility requirements are follows:

-21 Age, 1 Years of service & Semi Annual

whereas, PS eligibility requirement is immediate (no age or service required) as per plan document. Profit sharing eligibility is more generous compared to deferral requirements.

Usually, I've found relax eligibly for 401k Deferral contribution and little bit tough eligibility to get profit sharing contribution such as - 21 of Age+ 1 Years of service+ 1000 hours, sometimes last day and 1000 hours.

Above scenario is new to me and never dealt with before, I'm totally confused and It supposed to me discrimination not to give deferral opportunity but giving more earlier opportunity to get PS.

Is it allowable to give priority of getting profit sharing contribution rather delay/ hard rules for deferral contribution?

Please share your thoughts on this and provide related laws/regulations/reference (if any) to be sure about this dual eligibility.  

Thanks in advance. 

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  • stephen20 changed the title to Dual Plan Provisions, need experts advice

Maybe the employer wants to help the rank and file out, but doesn't want to have ADP dragged down and also wants to avoid complexity of testing the excludable group separately if they are unlikely to contribute anything?

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14 hours ago, Alonzo Church said:

The program you describe is legal and unusual. One question -- are the profit sharing contributions made in each payroll, or is there a one time contribution after the year ends?

At the year end. thank you for the advise.

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5 hours ago, Luke Bailey said:

Maybe the employer wants to help the rank and file out, but doesn't want to have ADP dragged down and also wants to avoid complexity of testing the excludable group separately if they are unlikely to contribute anything?

Deferral, Profit Sharing , Safe Harbor Non Elective 3%. No other or special contributions 

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Stephen20. I would think a plan like you describe would have a last day of the plan year rule for the profit sharing contributions. If it doesn't, I would be worried about setting up account for employees who have already left, and then finding and cashing those people out. 

I think you will want to suggest that tweak to your client going forward.

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