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Minimum Funding Requirement

Guest wjr

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A Governmental Agency has a 401(a) Money Purchase Plan in place with a 6/30 plan year end. They are saying in Dec 2002 that they will not make any contributions for the 7/1/2002 plan year at all. Can they disregard these first 6 months and not make any contribution?

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The queston is who is going to challenge the er? The plan is not subject to ERISA. There is no tax deduction so the IRS has no interest. The employees can object but they would have to sue the employer based upon the terms of the plan. Under IRS Rev rule 76-250 employers are not required to give benefit accrual for participants in a DC plan merely because 1000 hrs of svc has been completed if the ee does not meet other requirements of the plan.


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Non-lawyer opinion:

As always, the terms of a plan document are important. If the employer (even a government one) is stating that they plan to ignore the document, good legal advice might be appropriate. In addition, "state laws vary."

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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