mrslappywhite

Thank you! This is perfect. And client agreed to forfeit the excess after I told them all the issues with doing a reclassification if it were allowed (rerunning ADP/ACP, taxation issues, etc.)

Anyone have a cite or guidance on the feasibility or legality of "reclassifying" After-tax contributions as Roth deferrals? A client who claims they weren't aware that their document does not allow After-tax to be matched is balking at forfeiting match excesses and has asked if they can reclassify the After-tax as Roth so the participants can keep their match. I want to tell them NO but I can't find anything either in support of this or opposed to it.

Mike - I spoke to our "ERISA-fied" benefits officer and he seemingly agrees with you, so I believe that is the way I will go. Thanks! Lou S. - I will look to see if this is an option for the tested part of the plan. If so we can probably leave all money in the plan for this year. Thank you for the suggestion!

Hello, Plan in question is a start-up - both plan and plan sponsor. Plan sponsor established 5/1/15 & Plan effective 8/15. So first plan year is 8/1/15 - 12/31/15. Eligibility is 18/no service for deferrals and 18/1 YOS for SHNE...monthly entry for all sources. Anyone employed as of 7/31/15 is eligible for all contributions in the plan as of plan's effective date. Out of 29 EEs, 25 were employed as of 7/31/15 and therefore are eligible for all contributions. The four hired after 8/1/15 are all eligible for deferrals, but not SHNE (duh). I understand that when there is a dual eligibility situation, there is the potential for needing to segregate certain employees and test them if there is an HCE in that group. Most of what I find regarding this situation alludes to using permissive disaggregation of statutory EEs (to make up the safe harbor "plan") from those who are not 21 and haven't completed a YOS (tested "plan"). BUT - in this case, wouldn't that mean everyone in the plan falls into this category, and so I would need to test the entire plan for ADP? This makes for a return of $3150.00 and probably an angry plan sponsor and flabbergasted relationship manager. To put it another way, when there is a situation in which some EEs are eligible for SH contributions, and others are not, is the OEE rule the only rule applied to testing, or is the option there to only test those who have not met the PLAN'S eligibility for SH contributions? If I were able to do that, I would have four people in my test - 1 HCE and 3 NHCEs. Under this scenario, I would have a return of about $20 bucks, and (hopefully) an understanding plan sponsor and (but probably still confused) relationship manager. ***Just for fun, the plan is also Top-Heavy for the first year (and probably forever - there are 13 keys), so those three NHCEs would also be getting a THM (HCE is also a Key, which is probably obvious to all of you ERISA experts!) (And no, I had no input on plan design...) Thanks to anyone who read this and offers advice! Slappy

Tom, I do understand that an amendment through EPCRS is a "blessed" fix, but people around here (my firm, I mean, not the message boards!) would rather return the money. I have fought for amending plans in the past for this very reason but have been overruled enough times to know not to bother going down that road. As for the remainder of your response, from what I gather it says that, barring any break in service rules, you count that prior service and wouldn't treat the rehire as a new employee. If that is what you meant to convey, then I think we are in agreement. AdKu, The only part of the plan provision I was emphasizing was the word "NOT", as it seems to be the most critical word in the sentence regarding the establishment of a new ECP for a rehired employee. I did review the EOB and read the same section prior to posting. It is clear (as am I) that a rehired employee who had not completed the eligibility requirements prior to terminating has to meet them before being allowed to participate. What is not clear is the measurement period, which is what my long OP really boils down to: Does the ECP for the rehire begin on the rehire date or is it the plan year in which he is rehired, since he already had an ECP tied to his original hire date? Sorry if that wasn't initially clear, but after a night's sleep I found some clarity on the issue.

Good evening, I could use some help in determining the entry date for an employee who, on two occasions, worked a short period before terminating, and was ultimately hired full-time after his second termination. He never met the service requirement prior to being terminated on either occasion, but currently has satisfied it. The potential issue is, the plan sponsor allowed the employee to participate on the entry date following his satisfaction of the service requirements following his most recent hire date, but I am of the opinion that he should not have been allowed to enter the plan until the beginning of the most recent plan year. Plan specs are as follows: Plan Year is 11/1 - 10/31 Plan eligibility is 1 YOS/Age 21 with monthly entry dates Actual hours counted (1000) No BIS rules apply ECP shifts to plan year after initial ECP ends Paraphrasing & summarizing plan's master document provision regarding rehired Eligible Employee who failed to satisfy eligibility requirements: for purposes of applying any shift in ECP, employee's prior service is taken into account and employee is NOT treated as a new hire (emphasis mine). Employee data is as follows: Birth date: 6/27/90 Initial Hire date: 6/28/10 Initial Termination date: 8/25/10 1st Rehire date: 5/11/13 2nd Termination date: 8/16/13 2nd Rehire date: 5/12/14 Plan sponsor allowed EE to begin participation after 6/1/15 Hours worked during ECPs (using my understanding of plan document): 6/28/10 - 6/27/11 - 246 11/1/10 - 10/31/11 - 0 11/1/11 - 10/31/12 - 0 11/1/12 - 10/31/13 - 527 11/1/13 - 10/31/14 - 960 11/1/14 - 10/31/15 - 2080 The plan sponsor, I believe, began a new ECP as of 5/12/14, and has credited the employee with a year of service as of 5/11/15, allowing him to participate as of 6/1/15. I believe that, since there are no BIS rules in effect, and the plan document does not seem to allow for "resetting" the ECP to his latest rehire date, that he should not receive credit for a YOS until 10/31/15 and he should not be allowed to participate until 11/1/15. (Our recordkeeping software agrees with me, not that that means anything.) I actually hope I am wrong on this one because the employee has been making deferrals since June 2015 and received an employer contribution for 10/31/15, so corrections would be in order if I am right. Thanks to anyone who read this far...

Hello! Plan has a minimum deferral limit of 3% based on plan year compensation (just a plain-Jane 401(k) PSP, not a QACA or EACA). I am currently reviewing the 2015 census (10/31 pye) and there are multiple participants deferring less than 3%. Some are close but are not hitting 3% because they did not have deferrals taken from a bonus (even though plan does not exclude bonus compensation). Others are deferring a set dollar amount every pay, and on a plan year basis these amounts are not adding up to 3% of comp. And if I am interpreting the terms of the plan document correctly, the participants entering during the year, while they may be deferring 3% or more on a per-pay basis once they start, they are not technically at 3% because of the plan year compensation provision. Does anyone have any experience with this issue and how to address? This would be an operational failure, correct (plan operations not conforming to plan document)? And so would need to be corrected? Is retroactive amendment an option at this point? Either to eliminate/reduce the minimum deferral percentage and/or change to per-pay basis? (Although that still leaves the folks who are putting in a set $/pay.) Any advice would be appreciated...I've scoured the boards here and researched elsewhere without a light to shine on this. Thanks!