Partner Electing P/S Contributions

[Guest LCJ12]

I have a 401(k) PS plan that is cross tested and each partner is their own group. The ER wants me to write a memo to the partners instructing them to decide how much deferral and p/s contributions they would like to contribute for the year. I cannot actually say that it is up to the partner to decide what they want to do because obviously, we don't want the p/s contribution to appear to be a CODA. Any suggestions on how to write something up so the memo doesn't look like we are telling them to determine what they want to do for the year?

[Mike Preston]

Use the "survey" to your advantage. Liberally sprinkle with language that makes it clear that the decision as to actual contribution must rest with somebody other than the individual you are seeking input from. Sure, they should be told that their input is being sought, but each time you ask for information, mention twice that the ultimate decision is somebody else (Committee? Plan Administrator? other). Then make sure that the amount in not changed each year or, in the eyes of the IRS, "too frequently." (whatever that means).

Rumor has it that partnership new comp plans with each partner in their own group are going the way of the dodo bird, anyway, so you might want to let them know that the current arrangement has a limited life expectancy.