Safe Harbor - Per Pay Per Document....But

[Guest saotampa]

We tookover admin for a plan for 2007 that uses SH match. The document states that match is per pay, but since the plan was established in 2004, the prior TPA calculated it on an annual basis; that's how the client funded it, once a year in February of the year following. Can we do a clarifying amendment or something like that to bring the document into compliance on how they were operating?

[QDROphile]

If the plan were not operating in accordance with its terms, the only way to fix the error by retroactive amendment is through a VCP filing and the error you describe would not be a good candidate. But don't be so sure the operation was faulty. Match calculated by pay period does not necessarily require contribution by pay period. A careful reading of plan terms is necessary.

[Guest saotampa]

Thanks QDROfile. Unfortunately the document states that deposits have to be made by the last day of the calendar quarter following the calendar quarter to which they relate. Client says they can't calculate on a per pay basis and that was never the intention when they started the plan in 2004. We have their reports going back to 2004 and TPA calculated on an annual basis each year. What fun! I'll check into VCP filing.

[Blinky the 3-eyed Fish]

Hey QDROphile, what do you think of that document?

http://benefitslink.com/boards/index.php?s...269&hl=suck

http://benefitslink.com/boards/index.php?s...710&hl=suck

[QDROphile]

The document doesn't suck, but evidently the use of the document by this employer sucks, so that means the advice or assistance to the employer about adopting the document sucked. I am assuming that the document is a protoytpe, and all prototypes suck to some degree. Truly matching by pay period is an idea that sucks, even though payroll people may like it. That does not mean that payroll people suck, but payroll people are sometimes an impediment to optimal plan administration. Optimal plan adminstration is not the mission of payroll people, so the impediment is not the result of character flaw. So if the document is a prototype and it provides for a true pay period match, I guess it sucks, but election by the employer of the match feature with this employer is the worst part.

[Guest saotampa]

Thank you for that entertainment at 5:38 a.m! Brought a smile to my face....and yes it sucks....I sent an e-mail to the prior TPA yesterday asking him to find the amendment that was done changing the SH match funding to annual...let's see what happens.

[pmacduff]

I seem to remember something about the fact that safe harbor contributions had to be made no less frequently than quarterly per the Regs.

This seems to be what the OP states this plan doc requires.

Am I incorrect?

[jevd]

I believe we have an over use of a particular word in this post. I know I know it has become common place and back when I was a teenager (A long long time ago) it meant somthing quite different than today & I don't mean the dictionary version.

I ban its use in my household and have requested its non-use in business meetings etc.

Thanks for listening.

Sermon over.

[Kimberly S]

Although quite different topics, I agree with both P MacDuff and Jevd.

[Guest saotampa]

maybe you all should lighten up just a bit.

[ak2ary]

If I remeber correctly, IRS allows a safe harbor match to be made on a per payroll basis with the deposit quarterly as a way to avoid the otherwise applicable requirement of an annual true-up.

In operation, by making the contribution annually, your client is depositing more than is required under the plan terms. That makes your client an excellent VCP candidate for proposing a retroactive amendment to bring the plan document into compliance with plan operations. While the IRS may ask for some interest for the later deposit, they may trade that off for the true-up that was made and allow the retroactive amendment alone

[QDROphile]

Usually the HCEs are the ones who get the better out of the true-up because they front load more. If so, it not a good candidate.

[Guest saotampa]

HCE's actually were depositing on an ongoing basis and not all up front, so we will most likely go the route of VCP filing if the prior TPA can't locate the amendment.