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I would eliminate the age requirement. Having an age as low as 14 invites an auditor to ask for proof that this child actually works there. Why raise this issue?

Thank you, Mr. Presson and Kevin C, for your responses. As it turns out, the client is bound and determined to find the funding for this contribution, at least through 2020. We have recommended that they amend before January 1, 2021 to cease the safe-harbor nonelective contribution for 2021. If they can find the funding for 2021, we will then see if there is anything from the IRS that would prohibit them from adding the safe-harbor contribution in 2021. Kevin C.--you are correct that their document does not require them to deposit the safe-harbor contribution per payroll period. They had just made a commitment to fund it in that manner, and didn't want to stop unless they could no longer afford it.

We have a lot of controls in place at our firm and we have an annual SOC 1/SSAE-18 audit done of our recordkeeping and our fiduciary services. For the MEP plan, we are responsible for pulling the data from the payroll companies and ordering the money from the company bank account to be sent to the trust company. If the data feed is not at the payroll company or the ACH pull is not processed, we are on the phone immediately to rectify. If a plan is a continual problem, the proposed PEP rules gives us a way to spin that plan out to a stand alone plan. Software and programming is key here so that we are not manually tracking payroll dates. We are directly integrated with several different payroll providers so for a lot of the sub plans, the data is fed to us directly from the payroll companies. Fortunately, we have our own programmers on staff so we can have our programmers talk directly to their programmers and work out the direct links. Getting direct feeds also means that we get census and payroll data every pay period which is huge. In order the make the MEP efficient, we have to require that the employer use a payroll system so that we can get data electronically. We can't spend the time hand keying anything and it cuts way down on the errors. It also means that if the employer can get the data into the payroll software, we can get almost everything we need directly from payroll, without having the employer report it to us separately.

"By allowing most of the management and administrative responsibilities of sponsoring a retirement plan to be transferred to a pooled plan provider, PEPs will give employers, especially small unrelated employers, a way to offer their employees a workplace retirement savings option with reduced burdens and costs compared to sponsoring their own separate retirement plan." That little marketing piece comes straight out of the DOL's NPRM. When I saw that I wondered how they can know that before any plan is even up and running?

Roll it over to an IRA. From Notice 2005-05:

The reference in question is 1.401(m)-2(a)(5)(iv) Since the reg says a plan is "permitted to" disregard the match (not required to) it follows that a plan is also permitted to include the match.

We have an open MEP that we will be converting to a PEP and we operate in most states. With that being said, we have spent the last few years setting up a partnership with us as plan sponsor, recordkeeper and Plan Administrator, an outside 3(38) and an outside 3(16) administrator. We have several 3(21) advisors that sell into the plan. We have invested a lot of money in software, employee credentialing and ongoing education (personnel, advisors and employers) to put it together. There is a market for these types of plans, but it is not a solution for everyone. If you have an employer that wants almost no inolvement in the running of their plan, they may be a good candidate for a PEP. Ideally, if the employer uses an outside payroll vendor with a portal (180 or 360) where we can pull data from and push data to their payroll vendor, it becomes an even better candidate. In addition, we require an auto enrollment feature for each sub plan in the MEP. We are an open architecture recordkeeper and our software allows us to roll up the data for some purposes and break it down for other purposes. www.automep.com

As Bird said, it's ok. But I think it's silly. Are there really some 13 year old kids they need to exclude? Just eliminate the age requirement. Usually the 18 & 21 ages are there to exclude high school and college summer help or interns. Not sure an age 14 eligibility requirement accomplishes anything.

It's ok

Yes, I understand that the IRS (not just for the Corbel plan document but for many others) has approved plan documents even though they don't comply with the regulation I cited. Anyway, I can't really help you with your original question, Austin.

C.B. Zeller, I have always found these two sentences confusing. The first sentence excludes qualified and nonqualified, but of course qualified plan distributions are not 415 comp. But then the next sentence says you can include nonqualified deferred comp when it is received, which is directly opposite to what the part of the first sentence that applies to nonqualified deferred comp says, and then says, but only if included in income, which is close to saying , "only if you comply with the federal income tax law", and "only if the plan so provides." Just horrible drafting, I think. If the plan uses a W-2-based safe harbor definition, the plan will so provide. So it's really the equivalent of saying nonqualified deferred comp is includible when distributed, unless specifically excluded by the plan document. If you are using the classic safe harbor, which the language you quoted is part of, I think, then it is probably excluded, but if you are using W-2 based safe harbor, it is almost certainly included. There is a separate timing rule, which you have not quoted, i.e. the deferred comp that is included must be includable whether or not the employee has terminated employment, i.e., it must be deferred comp that pays out on a fixed date or upon a performance goal, which would likely be the case for phantom stock or units, and not deferred comp the distribution event for which is separation from service.