Safe Harbor Nonelective and inclusion of ineligible EE

[Guest dhall]

I have a 12/31 YE safe harbor nonelective plan with the standard 21/1 YOS, entry semi-annually.

This is a takeover plan for us, and I noticed that last year (2007 PY) some ineligibles were allowed to defer, and thus were allocated the SH NE contribution.

I figured that, although some STILL aren't eligible, that since they also deferred in 2008, I'd allocate the SH NE to them this year too, since they received it last year.

BUT, for some of the ineligible inclusions in 2008 who deferred, should I also allocate a SH NE to them too, or count them as being exludable EEs?

The client does not want to amend the plan for earlier entry/eligibility.

I know that if the plan DID allow for non-statutory entry/eligibility, that I would not have to allocate the SH to the exludables.

Thanks for the help.

[Jim Chad]

What does everyone think of amending eligibility to let be defer and get SH for 2007 and amend again to allow deferral but not SH last year and amend again to go back to 21 and 1 for the future?

I am thinking of this all in one amendment ,(probably take two pages.)

What do ya think?

[WDIK]

I figured that, although some STILL aren't eligible, that since they also deferred in 2008, I'd allocate the SH NE to them this year too, since they received it last year.

The fact that an approach was previously taken should not be sufficient justification, in and of itself, to continue that practice.

You should follow the terms of the plan document and explore the options under the various correction programs if these terms were violated.