new 401(k) plan

[Tom Poje]

plan is effective 1/1/07

but document not signed until 4/1/07, deferrals are ok because they didn't start until 6/07.

now, does that mean no one was eligible the first day of the plan year (and therefore avoid a large plan audit) , since the plan itself wasn't in existence until after the effective date. certainly you weren't eligibile to defer until after the signing date.

(Stupid plan in which only 7 people deferred out of many, many, many)

[Bird]

Nice try, but I think it's a stretch. If the plan was effective 1/1, and participants satisfied eligibility on that date, I think you have to say they are participants on that date. (Especially if there is a profit sharing feature, used or not.)

[david rigby]

Isn't there a general principle that a plan does not exist until the later of its effective date or adoption date?

[rcline46]

No, otherwise you could not set up a profit sharing or DB plan on December 30th effective January 1 of the same year and credit all service, etc for the year. That is why Tom mentioned the profit sharing feature (if any) was effective on January 1.

It is true that the elective deferral portion cannot be used prior to the signing of the document because there was no provision for deferrals prior to that date it was signed.

[Tom Poje]

Rcline: I don't think that is quite true. while you could have an effective date as of 1/1, you could certainly have someone enter the plan 7/1 and receive an allocation based on full year comp.

for that matter, in a DB plan you give someone credit for up to 5 years of past svc,

the document is the typical style giving only general language on eligibility/entry.

e.g. 3 months eligibility.

so, aside from specific language that says "entry date is retroactive to the begining of the year", or

'1st day of plan year if hired in the first half of the year, 1st day of following year if hired in the 2nd half of the year"

just when does someone enter in a new plan - does it back track to the effective date, or can it only be from the signature date if later.

[rcline46]

It has always been our practice that it back tracks to the Effective date, with the exception of elective deferrals. Remember, elective deferrals have only been around some 25 years, the issue of eligbility and date of entry a lot longer!

[JanetM]

I agree with Bird. Get an audit done. If you try and skip this year the process will be more painful next year when the auditors insist on looking at 2009 and 2008.