Changing Entry Dates

[Monica Barnard]

Client has SH 401k Plan. Current eligibility is 1 YOS with semi-annual entry dates. Client wants to change entry date for deferrals only to 90 days effective immediately. Document being used will allow this, but are there any problems with doing this mid stream?

[Tom Poje]

that shouldn't be a problem unless the plan is a safe harbor 401k.

The IRS is currently pretty strong in their belief that you can't amend those mid year. they say their hands are tied by the regs.

[John Feldt ERPA CPC QPA]

So, even though an explanation of the plan's definition of eligibility is not required as part of the safe harbor notice, a safe harbor plan cannot amend to let group of NHCEs into the plan before the beginning of the next plan year?

Mid-year addition of Roth and beneficiary hardship have a green light. Mid-year change for In-Plan Roth is okay for now, but not in the future.

Can the plan be amended mid-year to change the name of the plan if it's a safe harbor plan? How about the definition of "disability" - can that be changed mid-year? Can a safe harbor plan be amended mid-year to use a corporate trustee instead of individual trustees? How about an amendment mid-year to allow predecessor service for eligibility purposes? Can a SH plan be amended to change from balance forward to individual direction mid-year? Can the plan be amended mid-year to stop paying plan expenses from forfeitures to allocate instead, or to change the use of forfeitures in the next year to be in the current year? Can the SH plan be amended to allow installment payments or to remove installment payments mid-year? Can a SH plan be amended mid-year to change the one-year marriage rule to/from "not applies" from/to "applies"? Can a SH plan on a vol sub document be amended mid-year to add multiple employer language if the controlled group of employers break up mid-year?

edit: typo

[12AX7]

John, were you at the IRS Q & A yesterday at the ASPPA conference? In the same vein as your questions, the panel asked the IRS about amendments that would have no effect on the annual notice and/or the potential to reduce benefits in the plan.

Tom, did Lorraine convey my message to you? I suspect I was not the only one.

[Tom Poje]

no message yet, but Lorraine has been returning calls all day.

in fact I haven't even heard any comments about the program this year.

I had someone ask me why I wasn't there and I said "because they got rid of the basketball shoot, because someone complained after the basket ball bounced off the rim, hit her and she spilled her drink." The guy laughed and said he forgot about he was the one shooting that basketball, and then added something about "she was a nasty lady anyway..."

...

my gut feeling from the IRS agents I've talked to is that they would like have some leniency in amending things, but just where would you draw the line. people like to push things to the limit...

[12AX7]

You can remind Lorraine of the little gnome that approached her at the end of her session on Wednesday morning. The message was along the lines that all the gnomes of the Kalto Provence missed your presence at ASPPA this year.

[John Feldt ERPA CPC QPA]

I did not get to go this year :( - if i could add tears here, I would - I mean, for me it's like a disney trip to go to those sessions.

[12AX7]

I understand what you are saying. It's like a homecoming for me. I was fortunate to attend this year after changing jobs and not knowing if I would ever attend again.

[Kevin C]

I was at the Q&A session yesterday. This question came up and the IRS representatives said they were not going to provide any additional guidance on the issue.

I think the regs are pretty clear on what kinds of amendments can not be made to a SH plan mid-year. Obviously, others disagree. Like it or not, the regs are the clearest guidance we are going to get.

1.401(k)-3(e)(1)General rule.—

Except as provided in this paragraph (e) or in paragraph (f) of this section, a plan will fail to satisfy the requirements of sections 401(k)(12), 401(k)(13), and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year. In addition, except as provided in paragraph (g) of this section, a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of §1.401(k)-1(b) if it is amended to change such provisions for that plan year. Moreover, if, as described under paragraph (h)(4) of this section, safe harbor matching or nonelective contributions will be made to another plan for a plan year, provisions under that other plan specifying that the safe harbor contributions will be made and providing that the contributions will be QNECs or QMACs must also be adopted before the first day of that plan year.

[12AX7]

I mean, for me it's like a disney trip to go to those sessions.

Yeah, more like the Tower of Terror !

[John Feldt ERPA CPC QPA]

"a plan will fail to satisfy the requirements of sections 401(k)(12), 401(k)(13), and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year."

Maybe I am misunderstanding "section" - that means 1.401(k)-3, or does it mean something else?

If it means 1.401(k)-3, then where in 1.401(k)-3 is the rule regarding entry dates? The light has not yet turned on for me to see this so clear yet, so I would really like some enlightening, if you can.

Tower of Terror? Not as much now that Jim H is no longer there.

[Kevin C]

1.401(k)-3(e)(1)General rule.—

Except as provided in this paragraph (e) or in paragraph (f) of this section, a plan will fail to satisfy the requirements of sections 401(k)(12), 401(k)(13), and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year. In addition, except as provided in paragraph (g) of this section, a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of §1.401(k)-1(b) if it is amended to change such provisions for that plan year. Moreover, if, as described under paragraph (h)(4) of this section, safe harbor matching or nonelective contributions will be made to another plan for a plan year, provisions under that other plan specifying that the safe harbor contributions will be made and providing that the contributions will be QNECs or QMACs must also be adopted before the first day of that plan year.

I don't see how "this section" here could mean anything other than 1.401(k)-3. I've always thought this was pretty clear that it prohibits a mid-year amendment of any provision that satisfies a requirement of 1.401(k)-3. If the plan is also ACP SH, the same prohibition applies to mid-year amendment of provisions that satisfy a requirement of 1.401(m)-3. If the provision in question does not satisfy a requirement of either of those sections, I don't see anything in the 401(k) regs that prevents you from amending it mid-year. Of course, there may be other issues, for example 411(d)(6), that might prevent a mid year amendment. That's my $.02.

[Monica Barnard]

that's the way I read it, too. "This Section" does not address changing entry dates. Thanks to all for your discussion