gle318612 Posted June 20, 2012 Posted June 20, 2012 A company is considering a DC plan design with a 401(k) feature...100% match on up to 5% of compensation (414(s)). Autoenroll at 3% with 1% per year autoescalation up to 10%. Immediate vesting on the match in cash which will be put in the person's account after each pay period and follow the participant's investment direction. In addition, there would be a discretionary profit-sharing non-elective (I guess) employer contribution. It would be paid 2x per year based loosely on company performance for each associated 6 month performance measurement period. The range would be 0-6% of compensation with a target of 2%. This employer contribution, too, would be immediately vested. One condition being considered for the profit-sharing contribution is that an eligible participant would have to defer some pay (only allowed to defer in 1% increments) for all pay periods in the 6 month measurement period to get that associated allocation. If he/she elected not to defer for one pay period, he/she would not get the profit-sharing allocation for that period (true for HCEs and NHCEs). For those hiring in the 6 month period or terminating/retiring in the 6 month period, as long as they deferred for all pay periods during when they were employed, they'd get the profit-sharing allocation. Some believe the profit-sharing allocation can't be tied to this requirement. I've spent a fair number of hours researching and can't find any guidance/opinions that are spot-on for this. Thoughts? If you think this is definitely allowed or definitely not allowed and can provide the citation or reference, it would be appreciated. Thanks.
shERPA Posted June 20, 2012 Posted June 20, 2012 See IRC 401(k)(4). Benefits (other than matching contributions) must not be contingent on election to defer. I carry stuff uphill for others who get all the glory.
BG5150 Posted June 21, 2012 Posted June 21, 2012 Immediate vesting on the match in cash which will be put in the person's account after each pay period and follow the participant's investment direction. What does this mean? Not stock or property? QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
gle318612 Posted June 22, 2012 Author Posted June 22, 2012 Immediate vesting on the match in cash which will be put in the person's account after each pay period and follow the participant's investment direction. What does this mean? Not stock or property? Yes. The prior/existing design included an ESOP in which there is a semi-annual allocation of stock.
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