Late SHNEC

[Archimage]

I have a plan that is just now making the SHNEC for the 2001 plan year. Obviously there is a correction that needs to be made. I am thinking that the plan can use the SCP and deposit the SHNEC now with lost earnings and file an amended 5500 if needed. Is there anything else that anyone can think of that I am missing?

[kocak]

Are you planning to run and ADP test for 2001?

[Tom Poje]

I think you still might have to test ADP/ACP

98-52 VII B

a coda will not satisfy the adp safe harbor unless...contribution ...made...with the allocation and timing of section 1.401(k)-1(B)(4)

This would be no different than with a QNEC. the govt generally won't let you make one if it is more than a year past due.

The worst of all worlds, a 100% vested contribution, probably stuck using current year testing, etc.

I think you are right, you can use SCP

[Archimage]

the regs notice 98-52 refers to speak to the rule that says that you must make deferrals only out of current compensation for the year to which the deferrals apply. In other words, I can't defer for this year, wages that I am to earn next year or for service performed next year.

Would this change your mind about the safe harbor status for that plan year? (I tend to agree with you on the testing but I am trying to play devil's advocate.)

[Tom Poje]

I have grown to detest the term 'the devil's advocate'.

afterall, I wouldn't think you would really want to be an advocate for the devil.

that thought sends shivers up and down my spine! Maybe it is just me!!!!!!

we'll have to come up with a better term!

.......................................

I have a couple of thoughts

1.The ERISA Outline Book has a note which seems to read if your safe harbor notice is late, then the contribution is still safe harbor, but you also have to test.

2. suppose the plan wasn't safe harbor. Plan fails ADP test. As of this date you can not make a QNEC, except under the special rule of refunding the failure and also making a QNEC to match.

so, in both instances, if you are late it seems to imply the worst of cases. Of course if the plan was a money purchase and you were late you would also pay a penalty, so I guess this late business is a good fund raiser for someone!