Plan provisions

[Gary]

A 401k profit sharing is drafted such that each participant (of a plan with say 5 participants) gets its own allocation group. So after the plan year the employer decides on an allocation formula for each participant that meets the non discrimination rules.

Once this is decided is the provision incorporated by means of an amendment for that plan year and then another amendment the next year and so on for each year's allocation rates?

Thanks.

[Jim Norman]

Once this is decided is the provision incorporated by means of an amendment for that plan year and then another amendment the next year and so on for each year's allocation rates?

I doubt it, unless for some strange reason the plan document says something to this effect. Most just say the employer will decide how much to contribute to each allocation group, each participant is a separate group, and that's that. The employer contribution amounts should documented as part of the plan ops, but typically not a plan amendment.

[K2retire]

It should also be documented in the business records, such as a corporate resolution declaring the contribtuion that would be filed in the corporation's minute book.

[Bird]

For any "group" allocation-type plan, we prepare a memorandum describing the contribution for each group. When each participant is in his or her own group, we just list the employees and contributions.

When the IRS finally caved in and OK'd groups, they said you had to have some kind of memo describing the allocation...probably widely ignored.

[TLGeer]

We recommend an allocation schedule that describes the allocation pattern clearly, using the terms used in the plan documents, and that this be adopted by appropriate employer action (e.g., corporate resolution).