What to pro-ate for short plan year?

[BG5150]

I used to have a handy chart on what to prorate (and what not to prorate) for short plan years. I have since lost it.

Does anyone have a handy guide that lists what limits get prorated (and don't)?

[Lou S.]

I'm sure this is not comprehensive but...

415 & 401(a)(17) are prorated while 402(g) is not.

This can lead to some interesting results if SPY is less 5 month or less and someone maxes out deferral.

[BG5150]

What about vesting hours? Is it still 1000 hours for my 9-month plan year? Or is it now 750?

[Tom Poje]

vesting operates under an even stranger concept. short plans have no bearing, because you always consider a 12 month period. this means you end up double counting hours due to an overlap.

see Labor Reg 2530.230-2© (of course there is nothing to stop you from also amending a plan to say "A person will receive 1 yr service for vesting if they complete 500 hours in the short year from 7/1 - 12/31" as long as an individual who worked less than 500 hours in that period is credited with a year if they completed 1000 hours in the 12 months period.)

you don't prorate HCE determination either, because that is the 12 month period preceding the determination year.

[Trekker]

The handy chart you may be looking for is from McKay Hochman. I'm sure if you went on their website you can find it. The chart I have was updated in February 2009.

Another question about short years:

The final 415 regs provide that when a plan terminates during the year, the Limitation Year becomes a short year and related limits must be prorated. It seems logical that the Plan Year would also have the various limits prorated in a terminated plan (e.g.,401(a)(17) comp).

Can anyone confirm?

Thanks.

[david rigby]

Charts on McKay-Hockman site:

http://www.mhco.com/Library/Charts_010407.html

[BG5150]

I have a followup question:

When prorating, is it any part of the month counts? Full month? Fifteen (15) days?

Relius Administration seems to round up and down around the 15th.

For example, if the last day is August 9th, then the proration is 7/12. But if it's August 18 then, then it's 8/12.

The reg (1.401(a)17-1(b)(3)(iii)) just says "months."