Participant Opts Out!

[Jilliandiz]

If a participant chooses to Opt Out of a Profit Sharing Plan/ESOP whatever it may be...do they have to opt-out when they first become eligible, or can they at any point?

Participant was eligible 2002, has received allocations in 2002 and 2003, can they opt out in 2004 or did they have to back in 2002 when they first became eligible?

I know I remember reading something re: this but I cant seem to find the info again.

Thanks

[Belgarath]

Depends upon your plan document. Such an opt out could be generally permissible in a volume submitter plan if the plan was drafted to allow it, but not generally in a prototype. The IRS "prototype group" in the last round of the GUST docs wouldn't let us have an opt out in a prototype after eligibility had been satisfied. But they said it was fine in a VS. Assuming of course that it doesn't cause coverage testing to fail...

But, there are some folks who got their prototypes approved with such a provision! So it apparently made a difference who you got for a reviewer.

[KJohnson]

Also, if the participant is getting cash to opt out (The employer says that you can have X$ contributed to the Plan or Y$ in cash) then it has to be a one time irrevocable election upon initial participation in order to avoid being an impermissble CODA.

[Jilliandiz]

So would I not include them in testing if they opted out? Is that what I'm getting here?

[KJohnson]

http://benefitslink.com/boards/index.php?act=ST&f=20&t=4708

[Guest Pensions in Paradise]

Even though they opt out (assuming they are allowed to), they still have to be included in your testing. And opting out isn't a distribution event, so they can't receive a distribution until they terminate or satisfy the plan's in-service distribution requirements.

[Jilliandiz]

Are they automatically opted out of the any forfeiture allocations as well?

[WDIK]

I think the Will Parker (from Rodgers and Hammerstein's Oklahoma) principle applies here.

It's "All Er Nothin'".