TPApril Posted May 20, 2022 Share Posted May 20, 2022 Plan has a last day worked requirement in order to receive nonelective contributions. However, participants that terminate employment on 12/31 (cal yr plan) are not eligible. Never seen this, what is the justification? Do plan specs state clearly, must be active employee on last day of the plan year? Link to comment Share on other sites More sharing options...
ESOP Guy Posted May 20, 2022 Share Posted May 20, 2022 I am not sure I fully understand the question. Is the question: Since he terminated on 12/31 he wasn't active on 12/31 and if he had wanted to be active on 12/31 they should have quit as of the following 1/1 or is it a different question? Link to comment Share on other sites More sharing options...
TPApril Posted May 20, 2022 Author Share Posted May 20, 2022 I guess we've always treated someone who terminates on 12/31 as being included under 'last day worked' requirements and therefor eligible for the NE contribution. Link to comment Share on other sites More sharing options...
ESOP Guy Posted May 20, 2022 Share Posted May 20, 2022 10 minutes ago, TPApril said: I guess we've always treated someone who terminates on 12/31 as being included under 'last day worked' requirements and therefor eligible for the NE contribution. Yes, that is how we do it. So someone is saying they need to make their termination date 1/1 to get an allocation under a last day rule it sounds like. If they got comp and hours for 12/31 I don't see how you don't say they weren't employed on 12/31. What were they being paid for if they weren't working that day???? Luke Bailey 1 Link to comment Share on other sites More sharing options...
TPApril Posted May 20, 2022 Author Share Posted May 20, 2022 I'm with you ESOP Guy, I don't get it. After many years, this is the first time I've seen this feature, though I've certainly learned not to be surprised. Link to comment Share on other sites More sharing options...
MoJo Posted May 20, 2022 Share Posted May 20, 2022 Bottom line: Were they paid for 12/31? If so, they were employed on that day. Bill Presson and Luke Bailey 2 Link to comment Share on other sites More sharing options...
Bri Posted May 20, 2022 Share Posted May 20, 2022 And employed on 12/31 doesn't require "employed at 11:59:59 PM", such as if they only worked until 2 pm, flipped off the boss, and started partying early. Link to comment Share on other sites More sharing options...
A Shot in the Dark Posted May 20, 2022 Share Posted May 20, 2022 Our office uses FT William as our software of choice for plan documents and 5500 services. With FT William's Post PPA documents, the last day of employment and an employee that separates service on the last day is now an option that an employer can elect. 19a. If the Plan has a last day requirement, an Employee who terminates on the last day of the applicable period is treated as being employed for purposes of satisfying allocation conditions Yes / No https://www.ftwilliam.com/images/icons/minus-12-11.png Luke Bailey and John Feldt ERPA CPC QPA 2 Link to comment Share on other sites More sharing options...
Bird Posted May 23, 2022 Share Posted May 23, 2022 On 5/20/2022 at 2:11 PM, TPApril said: Plan has a last day worked requirement in order to receive nonelective contributions. However, participants that terminate employment on 12/31 (cal yr plan) are not eligible. Never seen this, what is the justification? Do plan specs state clearly, must be active employee on last day of the plan year? This is confusing. If you say that those who terminate employment on 12/31 are eligible, who/what is saying they aren't? Ed Snyder Link to comment Share on other sites More sharing options...
C. B. Zeller Posted May 23, 2022 Share Posted May 23, 2022 On 5/20/2022 at 4:31 PM, A Shot in the Dark said: Our office uses FT William as our software of choice for plan documents and 5500 services. With FT William's Post PPA documents, the last day of employment and an employee that separates service on the last day is now an option that an employer can elect. 19a. If the Plan has a last day requirement, an Employee who terminates on the last day of the applicable period is treated as being employed for purposes of satisfying allocation conditions Yes / No https://www.ftwilliam.com/images/icons/minus-12-11.png The question remains, if a plan answers "No" to this question, meaning they treat an employee who terminates on 12/31 as not being employed on the last day of the plan year, and they use a safe harbor allocation formula with a last day requirement, would they still be treated as meeting the requirements of the design-based safe harbor in the 401(a)(4) regs? Luke Bailey 1 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co Link to comment Share on other sites More sharing options...
Bird Posted May 23, 2022 Share Posted May 23, 2022 7 minutes ago, C. B. Zeller said: The question remains, if a plan answers "No" to this question, meaning they treat an employee who terminates on 12/31 as not being employed on the last day of the plan year, and they use a safe harbor allocation formula with a last day requirement, would they still be treated as meeting the requirements of the design-based safe harbor in the 401(a)(4) regs? That's a great question. My initial reaction was "it's ok" because you're just clarifying what it means to be employed (or not) on the last day. But the regs refer to "...employment on the last day of the plan year..." which says to me that you can't very well say someone employed and terminated on the last day is, well, NOT employed on the last day, for this purpose. Unfortunately the examples refer to "...employees who have not separated from service as of the last day of the plan year..." which muddles things, at least for me. In any event, no way would I use a term date of 12/31 and say that person is not employed on the last day of a calendar year. Luke Bailey 1 Ed Snyder Link to comment Share on other sites More sharing options...
401kology Posted May 23, 2022 Share Posted May 23, 2022 If the employee worked on 12/31 and quit that day, then they were employed on 12/31 and due an allocation if that is what the allocation requirement is for that source of money. Luke Bailey 1 Link to comment Share on other sites More sharing options...
TPApril Posted May 27, 2022 Author Share Posted May 27, 2022 On 5/20/2022 at 10:31 AM, A Shot in the Dark said: Our office uses FT William as our software of choice for plan documents and 5500 services. With FT William's Post PPA documents, the last day of employment and an employee that separates service on the last day is now an option that an employer can elect. Shot in the Dark - have you ever put this into action, or seen it used? Not sure why ftw offers this as an option, I'm not convinced that you can not give an NE allocation to someone who is employed on and terminates on the last day. Link to comment Share on other sites More sharing options...
Peter Gulia Posted May 27, 2022 Share Posted May 27, 2022 Has anyone from ftwilliam.com furnished an interpretation about what the adoption-agreement choice might mean? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
TPApril Posted May 31, 2022 Author Share Posted May 31, 2022 That would be a great idea Peter Gulia. 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