Jilliandiz Posted June 23, 2005 Posted June 23, 2005 Employer wants to terminate their plan beginning with the 2005 plan year...calendar year!! They provide a 3% Safe Harbor, are they still required to make the safe harbor contribution in the year of plan termination? What are the rules with this?
R. Butler Posted June 23, 2005 Posted June 23, 2005 It is my understanding that employer would need to provide the 3% through the terminaion date. Also plan would be subject to ADP/ACP testing.
JanetM Posted June 23, 2005 Posted June 23, 2005 You had to give 30 days notice before stopping the safe harbor contributions..... And since the amounts are 100% vested the participants have already accrued the 3% up to today. (As R Butler stated) If you gave notice today you would have to make the 3% contribution for the benefits that accrue over the next month. Am thinking it was notice 2000-3 and 4 - (but I could be delusional and it is somewhere in the regs) JanetM CPA, MBA
R. Butler Posted June 23, 2005 Posted June 23, 2005 You had to give 30 days notice before stopping the safe harbor contributions Where do you find that? I've heard that stated many times & don't necessarily disagree, but I've just never found it. Notice 2000-3 talks about 30 day notice for suspending matching contributions, but it doesn't mention SHNECs.
JanetM Posted June 23, 2005 Posted June 23, 2005 Since you can't take away benefits already accrued - that would cover the 3% up to today. I thought match and NEC would be treated the same. Maybe and using too much logic and assuming. Better to be safe then sorry. JanetM CPA, MBA
Tom Poje Posted June 23, 2005 Posted June 23, 2005 It isn't stated either way. personally I would lean towards the 30 day notice, simply following the rules for terminating a SHMAC as best as I can even though I have a SHNEC. Since the SHNEC could have been a 'maybe' we will do this (which would have prevented the problem from arising) I suspect the IRS would lean toward a conservative approach. but again, that is all personal opinion, unless an agent has stated otherwise elsewhere. on the other hand, it was not indicated if it was a distress termination, which if I recall is the second option, and in that case no 30 day was required.
Jilliandiz Posted June 23, 2005 Author Posted June 23, 2005 Either way, the plan will be subject to ADP/ACP testing for the plan year???
R. Butler Posted June 23, 2005 Posted June 23, 2005 Sure because your plan year isn't 12 months long.
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