Is payroll end plan-year considered "calendar-year"?

[Guest nmendicott]

Trying to find guidance about the definition of "calendar-year" according to the IRS. Have a client that bases end of plan year on last payroll date. Is this considered a "calendar-year" plan?

[david rigby]

A CY begins January 1 and ends December 31. But you knew that.

[K2retire]

If the employer doesn't happen to have a payroll that falls on 12-31, the final check of the year would be the last one considered for that calendar year. The first check in January is all counted in the next year. That is the same as how it is reported on the W-2s for the year.

[Guest nmendicott]

I guess my question is in regards to the Plan itself. Does the IRS consider a Plan year that begins with the first payroll period in January and ends with the last payroll period in December a calendar year plan even if it does not begin on 1/1 and end on 12/31.

[PLAN MAN]

If we are voting, I'd say no. 12/28/2009 is not the same as 1/1/2010.

More importantly, how as the plan sponsor been operating? When limits increased, when did they apply the increase?

[GMK]

An IRS calendar year starts on January 1. The last day of a calendar year is December 31.

for example, see:

http://www.irs.gov/businesses/small/articl...d=98673,00.html

[Guest Sieve]

A plan year (limitation year, computation period, etc.) must be a 12-month period. But, the plan year, I guess, could end on the last pay date in December, and start on the day after the last pay date. That would be a 12-month period. And, no, it would not be a calendar year. But, why/how is the year you describe really any different from a 1/1-12/31 plan year?--except, of course, that the 1st day of the year (entry date) will vary from year to year.

[Tom Poje]

if I understand the question correctly, its not a matter of doing it one way or another as how one sees things. its a requirement that the document specify how to handle compensation. for example ee worked 12/23 - 12/27, but this paycheck shows up the following year.

here is sample document language

Compensation Earned in Limitation Year but Paid in Next Limitation Year. If elected by the

Sponsoring Employer in the Election Form, then effective as of the first day of the first Limitation

Year beginning on or after July 1, 2007, Code §415©(3) Compensation for any Limitation Year

will include any amounts earned during that Limitation Year but not paid during that Limitation

Year solely because of the timing of pay periods and pay dates if: (i) these amounts are paid during

the first few weeks of the next Limitation Year; (ii) the amounts are included on a uniform and

consistent basis with respect to all similarly situated Employees; and (iii) no Code §415©(3)

Compensation is included in more than one Limitation Year.

so in effect, it sounds like, at least for for compensation purposes in your case, no election was made.

if the question is, for purposes of what limitation year to use, the documents I have are pretty specific in their definition

Plan Year. The term Plan Year means the Plan's 12 consecutive month accounting year beginning January 1st and ending the following December 31st. If the Plan Year is changed, a short Plan Year will be established beginning the day after the last day of the Plan Year in effect before the change and ending on the last day of the new Plan Year

[david rigby]

ERISA section 3(39) does not seem to preclude this definition.

Review Rev. Ruling 81-159, which addressed a 52/53 week plan year. It may be possible to define the plan year using the last paydate, but this RR implies it must apply for all purposes (vesting service, etc); unlikely that the sponsor could use that definition unless it's in the plan.

I might want a letter ruling on it, but that's just me.