One-time irrevocable election under two plans

[Guest tm3333]

If an employee becomes eligible for two governmental 401(a) plans at the same time may the sponsor permit him or her to make a one-time irrevocable election under both plans and still comply with the requirement under 1.401(k)-1(a)(3)(v) that the election be "made no later than the employee's first becoming eligible under the plan or any other plan or arrangement of the employer"?

I have researched and cannot find authority or guidance on this issue.

Thanks.

[ETA Consulting LLC]

Typically, this provision is used to make the employee a member of an 'ineligible' class of employees. When this is the case, then the employee isn't even considered in the ADP test at a zero deferral percentage because he is not eligible to defer to the plan. He would, however, be considered in the 410(b) test as non-excludable but not benefiting.

Since we are talking about 'governmental plans' the non-discrimination rules do not apply.

My immediate question is what are we trying to do here?

[Guest tm3333]

Typically, this provision is used to make the employee a member of an 'ineligible' class of employees. When this is the case, then the employee isn't even considered in the ADP test at a zero deferral percentage because he is not eligible to defer to the plan. He would, however, be considered in the 410(b) test as non-excludable but not benefiting.

Since we are talking about 'governmental plans' the non-discrimination rules do not apply.

My immediate question is what are we trying to do here?

The employer provides two different governmental 401(a) plans. Most employees are only eligible to participate in one of the plans; however, it is possible that some employees may be eligible to participate in both plans. In the event an employee is one who may participate in both plans and becomes eligible for both plans at the same time, the employer is concerned about the proper way to handle the one-time election and still satisfy the requirement in the regulations that the election be made no later than becoming eligible under the plan or any other plan of the employer. Is it possible to treat the two plans as one for purposes of the one-time election and allow the employee to elect under both plans at the same time?

[BG5150]

I thought the irrevocable election to not participate had to apply to ALL plans of the employer. You do not need to get separate elections for each plan.

[QDROphile]

There is not a lot of published authority about the rule. I think the rule is about timing of initial eligibility. If initial eligibility for any plan is the same date for both plans, the deadline for the election under each plan is the same date.

An election is not required to apply to all plans and the election is not limited to an election not to participate.

[Tom Poje]

lets suppose I have a profit sharing plan.

no exclusions, but someone elects out.

the basic logic in the eyes of the IRS (as far as I know is as follows)

since the plan had no exclusions, if the person is permitted to participate in any other plan, then, in effect, the person has made a 'deferral election' in the original plan where no such option was available.

as I recall, based on the example in the regs the initial plan was one that was a 5% contribution coming from your paycheck. all people. end discussion. every year. but you could elect out at, but it was not considered choosing to defer 0 because the plan was not a 401k plan.