Senior Moment

[thepensionmaven]

Pardon this senior moment, but

I'm setting up a SHNE 401(k), usually this would be done for a January 1st ed and the SH Notices would go out by December 1st of the previous year.

Prospective client wishes to go ahead with a safe harbor 401(k) 30 days after he supplies the employees with a SHNE Notice, which he wants to give out this week, which would mean that contributions would start May 1st.

Plan year = calendar year = limitation year, so what is the plan effective date? May 1 and a short plan year 5/1/14-12/31/14; or January 1 with comp measured on participation?

Sorry for the brain fart.

[Bird]

You can set up a SH 401(k) as late as Oct 1. I think what we usually do is make the plan effective retroactive to Jan 1, and the 401(k) part effective Oct 1.

[austin3515]

Assuming there is not currently a 401k? It was not mentioned, but I thought it an important clarification.

[Guest Platinum401k]

If there isn't a 401k plan in place (either no plan or just a Profit Sharing, for instance), you can fire it up right away. If there IS an existing 401k plan in place and it's on a 12/31 year end, you're out of luck for 2014 (past the 12/1/13 deadline). They can make the election to do safe harbor for 2015 no later than 12/1/14.

[austin3515]

I agree about firing it up right away. I've never told a client they have to adhere to the 30 day rule in year 1 because if you go before 30 days its facts and circumstances, and the plan having not been existence until now is certainly a relevant fact

[Bill Presson]

I agree about firing it up right away. I've never told a client they have to adhere to the 30 day rule in year 1 because if you go before 30 days its facts and circumstances, and the plan having not been existence until now is certainly a relevant fact

Agree. I'm also not as worried about the 30 day notice when it's safe harbor nonelective because that part has 0 impact on their decision to defer.

[John Feldt ERPA CPC QPA]

The deadline for the first SH notice for a plan that is implementing its initial deferral option is: no later than the effective date for deferrals to begin.

[BG5150]

Agree. I'm also not as worried about the 30 day notice when it's safe harbor nonelective because that part has 0 impact on their decision to defer.

Not true. If I feel that I need to save 7% of my income in order to fund my retirement, I may think about lessening my deferral if I knew that the company was giving me 3% at the get-go.

[Bill Presson]

Agree. I'm also not as worried about the 30 day notice when it's safe harbor nonelective because that part has 0 impact on their decision to defer.

Not true. If I feel that I need to save 7% of my income in order to fund my retirement, I may think about lessening my deferral if I knew that the company was giving me 3% at the get-go.

Okay, I'll grant that (though the 7% should be higher ). What I really meant is that the deferral would not cause any change in the amount of the employer contribution.