Starting a 401k with 1 month left in the year

[Santo Gold]

A company wants to start a 401(k) plan effective 12/1/2005, with a 1 month SPY, before operating on a calendar year starting in 2006. It is a doctors office, with about 17 employees. The 2 owner docs will receive very large bonuses in December, from which they will make 401k contributions. ADP testing is always a concern, but other than that, is there anything else to worry about with this situation? For example, if the docs get bonused (and do 401k from the bonus) and no on else does, is that a problem? ADP may not be too bad, since although there will be a small dollar amount of 401k for the NHCE's, we would use only 1 month of comp which would drive up the ADRs.

Thanks

[Guest oxdougw]

If you assume Prior Year testing for ADP/ACP you can assume a 3% NonHCE ave for the prior year only giving the docs a 5% deferral max for 2005, plus catchup if eligible.

You need to weigh using current year vs. prior year testing.

Most doctor plans I have are safe harbors but it appears you didn't have time to set that up by Sep. 30th for 2005.

[No Name]

Also, sounds like you could be top-heavy.

[Santo Gold]

We may try for a safe harbor or 1/1/06, but they may want to sneak in the 401k for 12/05 given their bonus situation.

Thanks for the replies

[No Name]

If top-heavy, 3% to all eligible.