Backdating of 401k enrollment?

[Guest EricW]

Hello. I am new to a small group plan, working in the HR Department. Today I had an employee come to me who technically was eligible for our 401k plan back on October 1. He did not enroll at that time, but now with only 1 month left in the year, decided for tax purposes that he wants to enroll and make a lump sum deduction from his pay for his missed deductions from this quarter. I didn't think that this was possible and that he was just SOL until 1/1/2010. Has anyone ever experienced this before? Any chance anyone can point me to IRS documents to support my ability to tell him one way or another?

Thanks in advance

Eric

[401king]

It's not an IRS document you need to reference, it's the plan document. It's very possible that he can enroll at anytime after his eligibility (10/1). What you need to look for is the entry dates.

It's not out of the ordinary for someone to miss their initial enrollment and then come it at a later time and enroll. Obviously he can't go back and deduct from prior payrolls, but he is probably entitled to defer 100% of the remaining 2009 compensation (up to limits).

[Guest Sieve]

The ability to defer 100% of compensation also is a plan document issue.

[J Simmons]

Never participate in backdating. Under certain circumstances, actions can be considered to have a retroactive effective date, but when dating a signature it should always be the date that the document was in fact signed.

For example, many executives and companies that participated in the backdating of stock options have, in recent years, been caught and prosecuted.

[Kevin C]

The plan should have language about when participants can make changes in their deferral elections.

[BG5150]

The plan should have language about when participants can make changes in their deferral elections.

Does it HAVE to say it in the plan? Or can it be an administrative procedure?

[Kevin C]

It would depend on what the document says. Our EGTRRA documents allow an option to have it be "As designated under the Salary Reduction Agreement or other written procedures adopted by the Plan Administrator."

[K2retire]

The plan should have language about when participants can make changes in their deferral elections.

Does it HAVE to say it in the plan? Or can it be an administrative procedure?

It is frequently and administrative procedure that does not appear in the document.