New Comp & Minimum Coverage

[Guest TomB432]

If a new comp allocation fails coverage (due to last day requirement) and the plan document contains "Fail-Safe" language does the plan sponsor have to make an additional contribution to those participants that are brought in to pass the Ratio test or can they just re-work the initial allocation to include the additional participants (as long as it still passes testing)?

[ETA Consulting LLC]

"New Comp" and "Fail Safe" appears to be contradictory terms. "IF" the fail safe is in the plan, then that would seem to create an accrual requirement that must be followed. However, if it is somehow resulting from a discretionary calculation that may be easily reworked (under the plan's terms with the last day requirement), then you could likely do that.

I would imagine you'd have to read the plan closely to determine the most appropriate set (with respect to what has already transpired).

Good Luck!