Guest sallie Posted August 20, 2004 Posted August 20, 2004 I have a 401(k) plan that allows participants to change their elective deferral percentage each pay period. Is this OK? Many plans I have seen allow a participant to go to zero at any time, but then the participant cannot elect to defer again until the next open enrollment (usually quarterly). But I can't find any statutory or regulatory restriction on the frequency of changing the amount of deferral. Does anyone know?
Brian Gallagher Posted August 20, 2004 Posted August 20, 2004 I would check the plan document. Our precious document (the adoption agreement to be specific), had a section that addressed when a person can get back in after stopping contributions. If it is silent, then it's a matter of administrative procedure. Remember: two wrongs don't make a right, but three rights make a left.
MGB Posted August 20, 2004 Posted August 20, 2004 I can't imagine why there would be any limitation by the government. Why would they care? Eveything is based on annual amounts. The only issue is how easily the payroll and plan administration can handle frequent changes. I presume the plans you refer to that "penalize" a person for going to zero is because it causes such a problem that they want to strongly discourage it. (Our plan allows changes as often as you want, but each change is not effective until the payroll run after 30 days after submitting it.)
Brian Gallagher Posted August 20, 2004 Posted August 20, 2004 Sorry, I didn't mead our "PRECIOUS" document, but "PREVIOUS". Ooooops! Remember: two wrongs don't make a right, but three rights make a left.
Guest Alchemyst Posted August 22, 2004 Posted August 22, 2004 Quite a few AAs specify the frequency of deferral changes. Good size companies with good record keeping can resort to "as soon as administratively feasable." In absence of specific plan wording, the following is a safe measure: deferral changes can be made only on entry dates - however, a deferral change resulting in 0% can be executed anytime.
Guest hyper Posted August 24, 2004 Posted August 24, 2004 There is no Code or ERISA restriction on the number of times a participant may change his or her deferral election. The limitations are usually in the Plan document and how fast the payroll department and /or the recordkeeper can process the request.
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