Adding Last Day Requirement

[dmb]

Calendar Year Plan has no requirements for a participant to recieve an allocation other than being a participant. No hours requirement, no last day rule. Is it too late to add last day requirement for 2011?? If not, how would this be administrered?? Thanks.

[Tom Poje]

too late. the person has already met the requirements to receive an allocation. you can't take that away from them. not a lot you can do. I've seen some suggest you could terminate the plan and put in a new plan, but good grief, I think I'd live with things for the current year and get it amended now for next year

if it was the other way around in which you had a last day provision, then no one accrues until the last day, and you can amend things the way you desire.

[BG5150]

Could you do no P/S but make a QNEC? Usually there is a last day rule for that. However, this year's contribution would be 100% vested.

[Guest Sieve]

Along the line that Tom mentioned (but did not recommend), you could

• establish a new 401(k)/PS plan (002) for 2011 with a last day allocation requirement and an effective date for the 401(k) provisions of 1/1/2012, then
  
• make the 2011 discretionary PS contribution to new Plan 002 (& none to 001), and then
  
• merge 001 into 002 early in 2012.
  

[QNPG]

Could you do no P/S but make a QNEC? Usually there is a last day rule for that. However, this year's contribution would be 100% vested.

Usually QNEC contributions fall under the same allocation requirement as the profit sharing contributions. Read your document for the alloc requirement. It may follows the PS OR uses the standardized 500 hrs or last day.

[John Feldt ERPA CPC QPA]

What's the plan's allocation formula? Is everyone in their own rate group for providing allocations? If they are, then they are entitled to get whatever that rate group would have been allocated, so you have no problem. Well, as long as coverage and 401(a)(4) etc. all pass.