Plan Characteristics/Features-Line 8a of Form 5500

[NQS]

It is my understanding that if a plan characteristic exists (e.g., is contained in the Plan Document), then that characteristic/feature should be coded appropriately on line 8a. There are instances, however, in which a plan characteristic is available but has never been used. For example, a 401(k) plan may allow for a discretionary match with no matching contributions having ever been made to-date. The same can be said of after-tax employee contributions or employer profit sharing contributions to a 401(k) plan. Is it necessary to code these as characteristics on line 8a prior to their actual use?

[Andy the Actuary]

Vote: [x] Yes -- It is a plan feature.

[NQS]

Vote: [x] Yes -- It is a plan feature.

Andy, thanks for the response.

While I basically agree with it, I don’t think the instructions for the 5500 forms are 100% clear regarding plan features. I would like to provide the following examples regarding codes; any comments on coding line 8A in general or with respect to examples below would be appreciated.

1. I believe the codes on line 8A are meant to indicate features that are available during the current plan year, whether or not there are accounts in the plan that contain these features. In this regard:

A. If a plan allowed for after-tax employee contributions (or even matching contributions) in the past, but no longer does so during the current plan year, I feel code 2K will not apply, even if there are participants who still have accounts containing past after-tax employee contributions.

B. My interpretation in the example above would, with respect to a post by MSmith on June 9 regarding code 2T, imply that basically all participant-directed 401k plans should use the code 2T. I agree with MSmith’s implication that this would make no sense.

2. I think there are other areas in which the Codes to be used for 8A are not 100% clear. As an example, if you have an age-weighted profit sharing plan, I assume both codes 2A and 2E should be used. Is this correct/was it intended?

Thanks for any responses.

[Bird]

I think yes, if the plan permits a type of contribution, that feature should be included. Having said that, we have a lot of plans that permit matching contributions and I don't think I've used 2K on all of them, and am not especially worried about it.

I think if a plan had a source that was used in the past but is no longer permitted...(wait for the coin flip)...mmm, I guess I would not include that code.

Yes, both 2A and 2E for a profit sharing plan that uses age, service or a grouping allocation.