Minimum deferral percent, plan year comp

[Guest Achilles]

Is there an issue here:

Plan eligibility is age 21, 6 months service, qtr. entry. Compensation is defined as the plan year, not from date of entry.

Plan document states a minimum deferral rate of 1% and max of 90%.

Participant was hired January 1, 2013, and entered the plan July 1, 2013, started deferring at a rate of 3%.

The question came up - this participant had 6 months worth of compensation prior to 7/1/2013, plan doc. states compensation is based on the plan year, and the plan has a minimum deferral rate of 1%.

Does some type of contribution need to be made to the participant for the 1% minimum deferral rate based on the compensation from Jan. 1, 2013 - June 30, 2013?

[BG5150]

The deferral rate is per pay period. It's not an overall figure for the year.

[Guest Achilles]

Thank you BG5150.

But if there were 13 pay periods from 1/1 - 6/30, for these 13 pay periods some type of minimum 1% contribution would not be made?

I agree and don't think there is an issue here, but others have raised a point that some type of error has occurred and needs corrected, but how to correct has not been determined.

[BG5150]

Short answer: no. There are no retroactive deferrals for periods a person was not eligible.

Again, the 1% minimum (and the 90% maximum) is on a per payroll basis, not an aggregate for the year.

[david rigby]

Don't overthink it.

If you are eligible to defer, you can defer. If you are not eligible to defer, you cannot defer.