Nassau Posted September 9, 2010 Posted September 9, 2010 If a plan is Safe Harbor and is doing a true up, can they eliminate terminated participants from the true up? Would they be allowed to implement the last day rule even if they are a true safe harbor?
Jim Chad Posted September 9, 2010 Posted September 9, 2010 FWIW. I cannot see any legal way to ignore terminated employees from a true up. SH cannot have a last day requirement.
austin3515 Posted September 9, 2010 Posted September 9, 2010 1.401(k)-3 Safe harbor requirements Paragraph ©(4): (4) Limitation on HCE matching contributions. The safe harbor matching contribution requirement of this paragraph © is not satisfied if the ratio of matching contributions made on account of an HCE's elective contributions under the cash or deferred arrangement for a plan year to those elective contributions is greater than the ratio of matching contributions to elective contributions that would apply with respect to any eligible NHCE with elective contributions at the same percentage of safe harbor compensation. I think what you are suggesting could cause you to violate this paragraph. Austin Powers, CPA, QPA, ERPA
Guest Phineas Posted January 19, 2011 Posted January 19, 2011 FWIW. I cannot see any legal way to ignore terminated employees from a true up. SH cannot have a last day requirement. Hi, sorry to be a late interloper, but as I understand it, under 1.401(a)(4)-2(b)(4)(iii), it states that a plan shall not fail to be considered a SH if the plan's allocation is conditioned on employment on the last day of the plan year or on an employee's completion of a minimum number of hours. Therefore, a SH can have a last day requirement. Anyone feel differently?
Tom Poje Posted January 19, 2011 Posted January 19, 2011 you are getting 'safe harbor' mixed up with 'safe harbor', which is an understandable confusion. 401(a)(4) refers to plans with safe harbor non elective formulas such as the same % of comp or the same $ amount to each participant (or even integrated within the guidelines. but the safe harbor 401(k) plans are a different animal, and thiose rule are found in 1.401(k)-3 a safe harbor must go to anyone eligible to defer, the only possible exception being the early participation rules
austin3515 Posted January 19, 2011 Posted January 19, 2011 you are getting 'safe harbor' mixed up with 'safe harbor', which is an understandable confusion. What a gem... Austin Powers, CPA, QPA, ERPA
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