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change of deferral election in mirror plan


Guest T-BONE

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Guest T-BONE

Assume that an employer has a 401(k) and a nonqualified "mirror" plan. If an employee who is eligible for the nonqualified plan changes his or her deferral election to the qualified plan, is it permissible to also change deferrals to the nonqualified plan?

In other words, is the deferral rate to the nonqualified plan irrevocable until the end of the year?

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Guest NQAdmin

The historical standard has been that all deferral elections must be made nlt December 31 of the year prior to the year the compensation is earned (though not necessarily paid e.g. bonuses). However the only real requirement is that the deferral election is made prior to the time period for which the compensation is earned. Can you use the same elections as the 401(k) plan? Yes. Beware, however, that part of the administration of the NQ plan is that it's not treated as a qualified plan. You can get a private letter ruling on a mirror 401(k) plan. If you considering redesigning a plan or establishing a new one, you may want to consider a PLR in addition to the required DOL filing.

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