One-Time Irrevocable Election

[Guest JDL]

I have a question regarding the one-time irrevocable election that is not treated as a cash or deferred election under 1.401(k)-1(a)(3)(iv) of the regs.

If a an employee elects, upon becoming eligible to participate in a profit sharing plan, to NOT participate in the plan pursuant to the one-time irrevocable election, does this then preclude such individual from participating in any other plans of the employer (both current and future plans)? That is the way I am reading the regulation, but I am not certain that I am interpreting it correctly. Anyone have any suggestions? Thanks!

[QDROphile]

I don't think that is the correct interpretation. The regulation says that a one-time election is not available if the person has previously been eligible under another plan of the employer. Nothing about the election affects participation in any other plan, subject to plan terms. However, a zero election would not make the employee ineligible under the plan for purposes of allowing a later one time election under another plan of the employer. One opportunity is all you get.

[Kirk Maldonado]

I'm not so sure that I concur in QDROphile's interpretation of the regulation. It expressly mentions plan not yet in existence and the duration of the person's employment with the company. Here is the relevant language:

A cash or deferred election does not include a one-time irrevocable election upon an employee's commencement of employment with the employer or upon the employee's first becoming eligible under any plan of the employer, to have contributions equal to a specified amount or percentage of the employee's compensation (including no amount of compensation) made by the employer on the employee's behalf to the plan and to any other plan of the employer (including plans not yet established) for the duration of the employee's employment with the employer, or in the case of a defined benefit plan to receive accruals or other benefits (including no benefits) under such plans.

[QDROphile]

Thank you for pointing out the error in my post. It should have said that a zero election WOULD make the employee ineligible thereafter. I don't know how both my fingers and proof reading slipped so badly. At least I had the last sentence to contradict the wrong one.