LANDO

I have an employer that is closing its doors and terminated all of its employees in December 2013. The plan includes a discretionary match provision, but requires employment on the last day of the plan year to share. No formal plan termination resolution/amendment has been executed to date. Is there any way the plan can waive the last day allocation requirement for the prior plan year and allocate a match to the terminated employees? Would an 11(g) amendment work? The plan is roughly 100 participants with 2 HCE's.

What about a non-safe harbor match. My understanding is that a non-safe harbor match does NOT have to be allocated on a 414(s) safe harbor def. i.e. match only needs to be based upon a "reasonable" definition of comp. Thoughts?

Wow, that seems risky. That would be violating the terms of the plan document at a minimum. Wouldn't the far safer approach be to do as ERISAtoolkit suggests above and test? Then if the allocation couldn't pass 401(a)(4) do an 11g which would allow for a correction of a failed 401(a)(4) test.

No problem, and thank you for the citation. As I'm sure you surmised, I was referring to the 2010 final regs.

Kevin, I agree with your comment that the clock stops when the contribution is deposited, but I do not understand you distinction regarding "credited to the account", unless you mean "allocated to to specific participants". The preamble to the regs say "[deposits]...will be treated as having been made to the plan in accordance with the general rule...when contributions are deposited with the plan...without regard to whether the contributed amounts have been allocated to specific participants or investments of such participants." Reg 2510.3-102(a)(2)(i) also says: "...any amount deposited with such plan not later than the 7th business day..." I would struggle with interpreting those underlined sections to mean anything but deposited to the trust, and not to be arguementative, but I certainly don't think they meant when the check is in the mail. I also am not aware of a footnote to the regulation above regarding a mailbox rule.

Masteff, thank you for your comment, and I will review the instructions to the 5500 again and that may certainly impact what we report on the 5500, but I don't think whether a deposit is timely "transmitted" is determinative as to whether a correction is required. If a deposit is made "late", interest on those late deposits it owed to the participants. The DoL regs are pretty clear that the clock only stops ticking when the deposits make it into the trust. They don't have to be "allocated" to participant's accounts, but they do have to be deposited to the trust.

Not sure that answered your question. We are using the date the deposit is made into the Trust as the Deposit Date.

The safe harbor for small plans. If the Plan Sponsor represents that the deposit was made "as soon as administratively feasible" we would take that into consideration.

Our sensitivity to the issue stems partially from the fact that we also act as discretionary trustee to the plans we administer.

No the mailbox rule doesn't apply. The regs say deposited to the plan...which would mean to the trust. Although they don't have to be "allocated" to participant's accounts.

As we get better and better at tracking late deferrals and loan repayments, and better at notifiying plan sponsors about those late deposits, the corrections (interest on late deposits) get smaller and smaller. For instance, deposits that we determine to be one day late can result in interest adjustments of less than one dollar. Anyone have thoughts on setting de minimis amounts for corrections? On a separate note, we have already determined that we will not recommend filing a 5330 if the penalty is less than $1.

Whatever the case, lost earning would need to be calculated. The fiduciary still has ultimate responsibilty for the late deposit of employee deferrals and who they hire to process them.