Short Plan Year

[Guest JBarn]

What are major implications of using short plan vs. "full plan year" during initial plan year? Example: Calendar Year Plan adopted 6/3/99. If first Plan Year starts 1/1/99 vs. 6/3/99, what are major implications and potential pitfalls?

[Guest Marjorie Rogers]

The advantage of using a 1/1 effective date as opposed to a 6/3 effective date is with a 1/1 effective date your contributions to the plan can be based on full year compensation.

[Guest Dook]

What kind of a plan is it? For a 401(k) plan it can have major imlications on testing.

In general a short plan year requires pro-rating the 415 limit of $30,000 and also the 401(a)(17) compensation limit of $160,000. So these impacts must be considered.

[Guest ndt123]

A short plan year does not require proration of the 415 limit. That is based on the limitation year, which may be 12 months long regardless of the length of the plan year (ie - calendar year limitaion year, 7/1 - 12/31 plan year)