Canadian Employees if 401(a) Plan

[Guest dietpepsi]

Any opinions on how to handle a situation where a plan sponsor assumed their Canadian employees could participate in both a DB plan and a 401(k) plan? My opinion is that they have no 415 comp so they may not have any benefits under either plan. Therefore, they can not receive any benefits under the DB plan and the plan sponsor should look to see how this effects their funding since they have been funding these employees. Also, the match should be forfeited in the 401(k) plan and the plan sponsor should decide how to handle the deferrals but they will not be distributed on a 1099R. Am I being too conservative?

[Guest wls]

It's okay to cover the Canadian employees (if the plan allows it). Sounds like the Canadian employees are employees of the sponsor or of a related employer (see Code 414(b)), which means they can be covered by the plan. And there is nothing that says only look at U.S. compensation for section 415 or other plan purposes.

[Harwood]

You better check the definition of Compensation before proceeding any further.

[mbozek]

I think you need to review this matter with canadian counsel. First how are the canadian ees compensated under the plan for benefit purposes- in US dollars or canadian $? If they participate in the US plan then they are being paid in US dollars. Compensating Canadian employees in US dollars may violate canadian currency or labor laws. Second there may be restrictions on Canadian ees working in Canada participating in a US plan not to mention not being covered under Canadian laws. There is also a question of whether the benefits are taxed under canadian tax law because the plan is not deferred under Canadian law. Finally Canada recognizes same sex marriages which could conflict with US law (the defense of marriage act restricts the definition of spouse in a qualified plan to a member of the opposite sex) or the terms of the plan.