Short Plan Year

[jkdoll2]

I have a plan where the plan year end is 11/30. Their corporate plan year end is 12/31. The plan year end use to be 12/31 - but 3 years ago they changed it to 11/30. I dont know why - we just took over as TPA.

If they want to change it back to 12/31 - do I need to do a short plan year from 12/1 thru 12/31? It seems silly to do it for one month.

What about vesting - do the participants get another year of vesting for the 1 month short plan year?

Thanks

[WDIK]

It seems silly to do it for one month.

What other option do you propose that would not be just as silly?

[Trekker]

If the rules on Form 5308, Request for Change in Plan/Trust Year, are current, if the plan year has been changed for any of the 4 preceding years, you may not be able to change it back quite yet.

All actions necessary to change the plan year, including a plan amendment and board resolutions, must be taken on or before the last day of the short period, so this could not be effective until 12/31/09, with a one month short plan year.

We had a plan year ending 12/30 that changed to 12/31. It had a short, very short, one-day plan year.

[Tom Poje]

you have to consider vesting on a 12 month basis regardless of whether you have a short plan year or not.

see Labor Reg §2530.203-2©. no proration. they even give an example, hours end up overlapping.

took me forever to find this one years ago.

[Belgarath]

Or you could just amend the plan to provide 100% vesting.

[Guest Sieve]

And there are other issues (including the short plan year Form 5500 requirement), such as Section 415 annual addition limitations, ADP testing for the short year, 401(a)(17) compensation proration, etc., etc. Tripodi has a chart somewhere, that should help, and I suspect some (or all) of those issues are addressed on this Board.

[Guest Kevin1]

Thanks for pointing out the chart, Sieve. I found it at Chapter 15, page 301.