fiona1 Posted December 28, 2005 Posted December 28, 2005 Has anyone ever encountered a 1 day plan year? Plan year was 12/31 to 12/30. Amendement is changing the plan year to 1/1 effective 1/1/05. So there is a short plan year from 12/31/04 to 12/31/04. Does anyone know what kind of things to look for to determine if nondiscrimination (ADP/ACP, Coverage) needs to be done? 12/31/04 is a Friday and there were some employees who worked and who earned compensation. It is a 401(k) plan. The pay period end date that included 12/31/04 was in 2005 sometime and the contributions were posted to the members accounts in 2005. So I think it's safe to say that there is no testing that needs to be done. There was nothing allocated on 12/31/04. Anyone have any thoughts?
david rigby Posted December 29, 2005 Posted December 29, 2005 Never seen one, but I think a one day plan year is permitted. Be careful about eligibility and discrimination testing. Be especially mindful of vesting, since you will (effectively) have to provide a year of vesting service for the short year. For other examples, try the Search feature, with a key phrase of "short plan year". I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Tom Poje Posted December 29, 2005 Posted December 29, 2005 in particular, for vesting see Labor Reg 2530.203-2 - you must use 12 month period to measure vesting
austin3515 Posted December 29, 2005 Posted December 29, 2005 Does anyone have any compensation in the Plan Year? Austin Powers, CPA, QPA, ERPA
fiona1 Posted December 30, 2005 Author Posted December 30, 2005 Does anyone have any compensation in the Plan Year? Yep. 12/31/04 was a Friday. There are people who worked on this day. Contributions are posted to the participant accounts on the last day of every month. But contributions for December of 2004 were posted on 12/30/04 - probably to avoid doing any testing for the 2004 plan year (12/31/04 to 12/31/04).
austin3515 Posted December 30, 2005 Posted December 30, 2005 Are you saying rFriday is a pay day? If not, I'm not sure you do have compensation (i.e., if defintiion of comp is W-2 wages? Austin Powers, CPA, QPA, ERPA
Kirk Maldonado Posted January 7, 2006 Posted January 7, 2006 There was an abusive tax shelter that had some unusual twist to it, something like a one day plan year or some other similar modification to the plan year. You should check out the IRS pronouncements on that shelter, to see if they apply to your situation. Kirk Maldonado
Just Me Posted January 9, 2006 Posted January 9, 2006 And don't forget that if it is a large plan, you may have a one day audit. Also, the 5500 will be due seven months after the end of the month in which the plan year ends -- based on your description you would have had two 5500s due in July, 2005.
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