standardized document requires 500 hours to receive er cont. - plan do

[Guest billy bong]

we recently purchased 20 plans from a tpa that had their own document and found a few discrepancies.

1. Their standardized prototype required at least 500 hours for ALL participants to receive an employer contribution, even those NOT terminated. My understanding is those employed on last day, regardless of hours, must receive a contribution (for plans using a standardized document).

2. The document does not state procedure to use to pass 410b should it be failing. Again, is this not a required provision for a non-standardized prototype? It appears they would "amend" the document using the criteria most beneficial to the employer to pass coverage (e.g., employees with least number of hours, vesting or compensation).

I've never seen documents like these before and am a bit surprised that they received approval from IRS.

Thanks for any assistance/input on the subject.

[Guest]

double check the wording on the hours requirement. I have seen a number of documents the simply added a paragraph (or at least something similar to the following

'notwithstanding, as of 1/1/90 anyone with 500 hors or employed on the last day shall be entitled to receive a contribution...'

on the other hand, if it came from a tpa who had their own document, it could be the document was never updated...(ugh)

[Guest billy bong]

tom:

no such wording since all of their plans were administered as <500, 0 cont. would this be considered a plan document failure, across the board for all plans that have adopted their standardized prototype? would it be necessary to submit for walk in cap for all the plans?

thanks

what is your take on the non-standardized prototype? is this something for a walk in cap?

[Alf]

If they received IRS approval for their standardized prototype, don't they have reliance under 7805(B), even though their document doesn't comply with the Rev. Proc. 89-9 series of requirements for prototypes? If you have a letter, you shouldn't have a plan document defect.

[GBurns]

I am suspecting that BB has misread the document. In your original item 1, you stated that the document required contributions even to those "NOT terminated". Why would there be any concern that those "NOT terminated" would be getting a contribution? Isn't that the purpose of the plan? Also, it does not matter whether a person employed on the last day has hours or not, what matters is who is entitled as per the document, standardized or not. If the document required red shoes on the last day, that is the requirement.

Regarding item 2, I have very rarely seen any document that states a procedure to be used to pass any test or correct any failure. Instead they make provision to use whatever is allowed by the Regs etc, when the situation occurs, and of course they should use whatever is most beneficial to the employer. What else would you use?