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Absolutely! But it is also self-correcting. Our loan policy (consistent with DOL guidance) says one defaulted loan on the books, and no more loans - until it's paid in full. PERIOD. Plus those pesky tax consequences.....

Personally, I think the biggest issue in your example (CRD available only for several months during 2020) is the failure to TIMELY communicate to the participants their right to a special distribution before the expiration of such rights. i.e. what is the point of adopting such (an optional) provision if they are going to wait until 7 months after the expiration of the provision? Notwithstanding the statutory deadline of July 31, 2021, an SMM explaining this provision should have been provided immediately after adoption of the amendment. ...... Jeff

Oh I agree with you, just saying that is the argument some will make.

This topic was just discussed in the ASPPA All Access session on compensation. The speakers agreed that the self-employed individual does have earned income for the short plan year.

401(k) Steve, there are several issues here. As MWeddell states, you will need to look at the terms of the plan document. In particular, does the plan document require a last day of plan year service requirement for receiving the match? In addition, as MWeddell points out, unless you can find a permissible disaggregation scenario (i.e., QSLOBs), the matching portion of all the plans in this controlled group will have to be aggregated for purposes of passing 410(b) coverage testing (with this LLC's participants showing as not benefiting), and for 401(a)(4) testing for contributions (in this case, the 401(m) test.) MWeddell, question for you: Is BRF testing really needed under these facts? In essence, the BRF test would go back to 410(b) ratio test for current availability of a BRF, and then a nebulas effective availability test, which seems to go back to some version of 410(b) testing. If you pass the 410(b) ratio test for coverage, you will likely pass the BRF testing under 401(a)(4).

Jeff Hartmann and G8Rs, thank you for your further observations. You’re right that the essential failure is about not communicating promptly after the provision was adopted. (I deliberately put that in the hypo.) A challenge many lawyers face is that a client acted, or failed to act, with no lawyer’s or other advisor’s advice, and one spots a problem only after the harm already is done.

I agree that it doesn't need to be in the SPD if it's no longer applicable. But, those are DOL rules. Treas. Reg. 1.401-1(a)(2) includes in the definition of a qualified pension, profit sharing, etc. plan that it's a written program "which is communicated to the employees.." The IRS hasn't provided detailed rules on the communication requirement (other than in limited situations, such as SH plans). But, as pointed out, if you don't communicate this type of provision, you'd have an effective opportunity problem that could violate the nondiscrimination requirements of 401(a)(4) if you don''t communicate it to the NHCEs once it's available.

Luke Bailey, thank you for sharing your good sense.

I vote "no," Peter.

Yes. Depends on the content of the plan document and/or any amendment that will be made to it. There are coverage or BRF testing implications too.

What you describe is a ruling that indicates that a condition to initiate a loan - being a requirement that payroll deduct be the only way to repay the loan, cannot be prohibited by a non-federal law. IT DOES NOT say that state based wage and hour laws can't give a participant the right to then remove consent to continuing withholding from their paycheck. There is a difference....

Not all that uncommon, especially in hourly based plans. You should check your current definition of service and make sure it isn't already counted. Assuming it is not discriminatory, they could always amend the plan to include additional service credits from a fixed time period for certain group of employees. Be careful about including/excluding participants who didn't return to work. Maybe something like, all participants who were actively employed on 1/1/2020 and also actively employed on 1/1/21 will be granted 1 year of credited service notwithstanding the actual hours worked during that period. Probably need to defined "active", but you get the idea. We have also seen sponsors wanting to boost benefits to make up for COVID related pay cuts.