changing plan year on a profit sharing plan

[Lori H]

a calendar year psp(appx 18 particpants) wants to change the plan year to 4-1-04 - 3-31-05 in order to avoid making contributions to a couple of terminated employees. i advised that this can not be done retroactively. however, if they wanted to set it up for 4-1-05 thru 3-31-06, and the amendments were signed prior to april 1, 05. what liability would the plan have for the short plan year(1-1-05 thru 3-31-05) outside filing 5500 by 10/31/05?

[david rigby]

My understanding is that a change in plan year must be adopted no later than the last day of the short PY.

Short PY will create a year of vesting service.

Be careful about your top-heavy determination(s).

Be careful about any allocation for the short PY.

[Tom Poje]

To clarify " Short PY will create a year of vesting service."

most likely it will. vesting has to be measured in 12 month periods, so despite a short plan year, you would still look at a 12 month period to determine if an ee has 1000 hours.

see (Labor Reg 2530-203.2©.

[austin3515]

You could therefore end up with 2 years of vesting service in 15 months (i.e., if they work 1,000 in the "unamended" plan year, and in the 12 months prior to the end of the short plan year-check Tom's site as this will clarify what I mean.

[Lori H]

tom

i am trying to find that labor reg 2530-203.2© on cch pension plan guide, but can not locate it.

many thanks

[austin3515]

http://www.dol.gov/dol/allcfr/Title_29/Par...R2530.203-2.htm

[Lori H]

thank you kindly.

have a super weekend.