SH plan - first year

[Guest c2ddave]

PS Plan effective 1/1/04. 401k effective 7/1/04. Deferrals did not begin until 9/1/04. The client made the 3% SH nonelective with each payroll after the 9/1/04 date. Do we need to true up to comp from 7/1/04? Or can we do it from 9/1/04 and 414s it?

Sh notice simply states that the er will contribute 3% of your compesation.

[austin3515]

You need to look at the definition of compensation. More likely than not, if the 401(k) provisions are effective 7/1/04, the plan will call for a 3% from 7/1/04. A lot of documents too though will, based on a literal interpretation, call for 3% of full year pay (or at least pay as a participant). That's because it really is a nonelective contribution.

Really though, you need read the nuances of the document, so speculation is almost worthless...

[Guest c2ddave]

The compensation of comp for the Safe harbor contribution says that it can exclude comp prior to eligibility to defer. I thought this was general to defer to the notices definition, but the notice doesn't specify any exceptions.

[austin3515]

I'd say the conservative thing to do is give them the 3% from the plan document eligibility date (7/1/04). I think you could make a case for excluding pre-9/1/04 compensation, but probably not a very good one. It certainly carries more exposure...

[david rigby]

... it can exclude comp prior to eligibility to defer.

Can? Sounds too ambiguous to be a plan definition.