Kevin C

I found it interesting that the article's other example is a participant who did not receive a SH notice AND was not notified of her right to make elective deferrals. I would expect that combination to happen when the employer doesn't realize the person is eligible. If participants received enrollment forms and an SPD, but did not get a SH notice, I'd argue it was much closer to the example with Indigo rather than the one with Violet.

Sieve, I disagree with you on 2. 1.401(k)-3(e)(2) allows the mid-year addition of a SH CODA to an existing profit sharing plan. While the 401(k) portion of the plan can't have a retroactive effective date, what stops you from having the profit sharing portion be effective 1/1? I think you will also get disagreement on part of your 3. The 415 limit is prorated for a short limitation year. But, the limitation year is not necessarily the same as the plan year. Our EGTRRA VS documents have this note in the section defining limitation year: [Note: If the Plan has a short Plan Year for the first year of establishment, the Limitation Year is deemed to be the 12-month period ending on the last day of the short Plan Year.]

Yes, EGTRRA changed it for matching contributions and PPA changed it for other DC contributions. While a PPA amendment is not required until the end of the 2009 plan year, you have to operate the plan as if that amendment was in effect. See PPA 1107. I'm using a PPA compliant vesting schedule in the EGTRRA restatements.

jpod, I don't see that working, either. The only exception to being an alternative defined contribution plan that is based on eligibility has a 24 month window, 12 months before and 12 months after the termination date. These people are eligible under the current plan, so the current plan would be an alternative defined contribution plan with regard to the spun-off plan. If you want to do headstands, cartwheels and other gymnastic maneuvers to accomodate these employees, think SEP or SIMPLE IRA for everyone. Then, you can have a different employee group mad at you.

None of those options will work. Plan termination is not a distributable event if there is an alternative defined contribution plan maintained by the employer.

If the plan termination is in connection with a 410(b)(6)© transaction or the employer incurs a substantial business hardship, I'm not seeing an advanced notice requirement. Here is a description from the preamble to the final regs. Of course, in your situation, today is the last day of the plan year. I don't see anything that requires advanced notice to terminate on the last day of the regular plan year, either. If the plan document still has the SH provisions in effect on July 1, then you would be under the mid-year termination rules.

Don't you just love cites that can have more than one interpretation? http://www.relius.net/News/OtherResources.aspx?T=P Sunguard Relius has an amendment on their website for suspending the SH match mid-year. Here is footnote number 3 from the 6/11/2009 amendment: The language Sieve quoted is from the Feb 6, 2009 technical update. The language in the May 21, 2009 update matches the language in the regulation. http://www.relius.net/News/TechnicalUpdates.aspx?T=P This would be so much easier if the IRS stayed with the language from Notice 2000-3, Q&A 6:

I read it the same way you do. Notice 2000-3, Q&A 6 is the clearest example of the wording that I can find. There is also a description of the rule in the Background section of the preamble to the 5/18/2009 proposed regulations (3rd to last paragraph). The new rules for mid-year suspension of a SH non-elective use the same timing for the effective date. I don't see anything from the IRS that requires the amendment to adopted at least 30 days before it is effective.

The only cite I recall is the definition of catch-up eligible in 1.414(v)-1(g)(3).

One of the requirements for an -11(g) amendment is that it can't reduce anyone's accrued benefit. Your first step is to check the plan language to see what it says about the allocation. Some documents say that the new comparability allocation must satisfy 401(a)(4) and other documents do not. Depending on what the document says, you may or may not be able to amend retroactively to give that older NHCE a smaller allocation. Here is a prior thread on -11(g) amendments. http://benefitslink.com/boards/index.php?showtopic=42002

Another place is 1.402(f)-1, Q&A 2.

Are you wanting to amend a plan to remove them? Are you concerned about them no longer being available to a participant who doesn't make an election within 90 days of the first automatic deferral? Or, something else?

Elective deferrals in a 403(b) are subject to universal availability rules instead of the coverage rules that would apply to a 401(k). Employer contributions and Employee after-tax contributions in a 403(b) are subject to coverage rules in the same manner as they would be in a 401(k). See 1.403(b)-5(a).

There are prohibited transaction issues, too. One of the requirements for the statutory exemption for participant loans is that they are made in accordance with specific provisions regarding such loans set forth in the plan §2550.408b-1(a)(iii).

Our daily valuation software had a problem with this when we first had it come up in 2007. At the time, they had part, but not all, of the disproportionate match rules Sieve referenced included in their programming. The software was excluding part of the match when it really wasn't supposed to be excluded. They showed us how to work around it. I don't know if that has been fixed. If your match is over 100%, it wouldn't hurt to carefully review the testing to make sure it is working correctly for your situation.

You should look at Rev. Proc 2007-44. Section 19 includes a discussion on amendments to pre-approved plans. There will be other useful information scattered throughout. If you amend the pre-approved language in a volume submitter document, you lose reliance on the opinion letter. But, if those changes are minor (as determined by the IRS), you can still submit for a determination letter using Form 5307. We have submitted amended VS documents in the past with what I would consider significant changes and were still allowed to use Form 5307.

What kind of plan document is it? If it is a standardized prototype, the opinion letter will reference 401(a)(4). If it is a GUST version non-standardized safe harbor prototype, it will have something similar in the opinion letter.

I agree that it gets strange if there is no match for the entire year. But, the regulations clearly say the exception is for plans with no HCE's benefiting. I don't see a 410(b) exception that applies to the 401(m) portion of the plan when no match is made, but an HCE benefits. I think that situation supports an interpretation that no match being made means not benefiting. The issue I have to deal with is tied to the 410(b) rules, but my problem isn't with 410(b). My main concern here is ACP testing. The solution to the 410(b) question determines whether or not these two are included in the ACP test.

Ahhh, but if you are right about my question, then the 410(b) test DOES have to be run even if there are no matching contributions made for the year. The exception in 1.410(b)-2(b)(6) is for plans that benefit no highly compensated employees. You are saying the HCE's benefit because they would have received a match if there was one. This plan has HCE's. We've strayed a bit from my situation, but the issue is the same. Do they benefit if there is no match? If the answer is yes and you change the situation a little, then how do you correct a failed 410(b) test? An -11(g) amendment has to have substance. Changing the eligibility requirements for a contribution that doesn't exist seems short on substance to me.

Sorry, but no it doesn't help. In paragraph 4.b., it says "An employee is treated as eligible to receive matching contributions even if he doesn't make the contributions required for a match, as long as he would receive the matching contribution had he made such contributions." These employees did defer. There was no match for the portion of the year they were participants. Sal does not discuss the circumstances I outlined. 1.410(b)-3(a)(2)(i) refers you to the eligible employee definition in 1.401(m)-5 I'll rephrase the question. Can they be "directly or indirectly eligible to receive" something that doesn't exist?

I'll warn you up front that I don't do much with individually designed documents. Here is what I get out of the Rev. Proc. I'm reading 14.04 as saying your remedial amendment period would end 1/31/2012, the end of the current 5 year cycle for cycle A plans. If you want to do a priority off-cycle filing under 14.02(2), you will have to file by 1/31/2010. But, that filing would be reviewed under the 2008 cumulative list for cycle D. You would have to restate and submit again by 1/31/2012 because the original letter you receive would expire on 1/31/2012 (14.01). The restatement would be using the cycle A 2010 cumulative list. Unless you have a unique provision that you want IRS approval on, I don't see any real benefit to submitting off-cycle. You would need to restate and file by 1/31/2012 either way.

I'm not sure it is the same as with deferrals. These two actually did defer starting 7/1. With deferrals, the employee can take an action and receive the contribution. Here, nothing these employees could have done would let them receive a match because there was no match to receive.

2008 calendar year plan. SH match plan to start the year, but SH match was suspended 3/31/08 after proper notice. After the amendment to suspend the SH match, a discretionary match is available for 2008, requiring 1,000 hours and employment on the last day of the year. Two new participants enter the plan 7/1/2008. They complete 1,000 hours in 2008 and are employed on 12/31. No discretionary match is made for 2008 and no forfeitures are allocated. They were not participants while the SH match was in effect, so they get no matching contributions for the year. Are these two considered as benefiting or not benefiting for the 410(b) test on the 401(m) portion of the plan? Our valuation software counts them as benefiting, but I'm thinking they should be counted as not benefiting. I don't see them as being directly or indirectly eligible to receive an allocation of matching contributions since there is no match for the portion of the year they were participants. Anyone else have an opinion?

Try Section 14 of Rev. Proc. 2007-44. From 14.04, it looks like you have a choice of when to submit.

K2retire, Are you thinking of this? "Plan" is defined in the next paragraph. When you put it all together, you get what Tom says. If you aggregate for coverage, you have to aggregate for discrimination (ADP/ACP).