Adding 401(k) to PSP Issue

[chris]

Employer with current PSP (no 401(k) provisions) wants to add safe harbor 401(k) as of Oct 1. Eligibility will be age 21 and 1 YOS. Employer wants all current participants of PSP to be able to participate in 401(k) upon its adoption, i.e., as of Oct 1. So that all such participants can enter the 401(k) portion of the Plan any problems with having quarterly entry dates for 401(k) (which means Oct 1 will be an entry date and all current participants of PSP will enter as of Oct 1) upon its adoption and then amending plan anytime prior to Dec 31 to provide for dual entry dates? Thanks in advance for your replies.

[BG5150]

I think you can just have the semi-annual dates and a one-time special entry date. No amending necessary,.

[Kevin C]

Is the current PS plan 21 & 1 with semi-annual entry? If so, set the 401(k) portion up with the same provisions, effective 10/1/2014 and everyone who is a participant in the PS will become a participant in the 401(k) portion as soon as it is effective. Everyone else will enter semi-annually after attaining 21 & 1. Our VS document contains the following:

Participation on Effective Date of Plan. Unless designated otherwise under AA §4-4, an Eligible Employee who has satisfied the minimum age and service conditions and reached his/her Entry Date as of the Effective Date of the Plan will be eligible to participate in the Plan as of such Effective Date. If an Employee has satisfied the minimum age and service conditions as of theEffective Date of the Plan but has not yet reached his/her Entry Date, the Employee will be eligible to participate on the appropriate Entry Date. The Employer may modify this rule under AA §4-4 by electing to treat all Employees employed on the Effective Date of the Plan as Participants (regardless of whether they have satisfied the Plan’s minimum age and service conditions) or by designating a specific date as of which all Eligible Employees will be deemed to be a Participant, (regardless of whether the Employee has otherwise satisfied the minimum age and service conditions).

Your document should have similar language.

[chris]

BG5150:

So have an October 1 entry date with no documentation? I'd feel more comfortable having quarterly and then doing a short amendment solely to change the entry date provision. That way I would know all are in on Oct 1 without question.

Kevin C:

PSP has entry date for PSP as retro to first day of plan year.

Language regarding eligibility in draft amended and restated doc is not as flexible as language you cite from your docs and is as follows (currently reflects dual entry for 401(k)):

3.1 CONDITIONS OF ELIGIBILITY

(a) Eligibility. For all Plan purposes, any Eligible Employee who has completed one (1) Year of Service and has attained age 21 shall be eligible to participate hereunder as of the date such Employee has satisfied such requirements. However, any Employee who was a Participant in the Plan prior to the effective date of this amendment and restatement shall continue to participate in the Plan.

3.2 EFFECTIVE DATE OF PARTICIPATION

(a) Effective date of participation - Elective Deferrals. For the Elective Deferral component, an Eligible Employee shall become a Participant effective as of the earlier of the first day of the Plan Year or the first day of the seventh month of such Plan Year coinciding with or next following the date such Employee met the eligibility requirements of Section 3.1, provided said Employee was still employed as of such date (or if not employed on such date, as of the date of rehire if a 1-Year Break in Service has not occurred or, if later, the date that the Employee would have otherwise entered the Elective Deferral component had the Employee not terminated employment).

(b) Effective date of participation - Nonelective Contributions. For the Nonelective Contribution component, an Eligible Employee shall become a Participant effective as of the first day of the Plan Year in which such Employee met the eligibility requirements of Section 3.1.

[chc93]

I have seen plan amendments that do not modify the eligibility requirements and entry dates, but instead, in the section for 401k deferrals, have an effective date there. For example, calendar year, Jan 1, July 1 entry dates; The plan amendment that adds the 401k salary deferrals says something like "effective June 1, yyyy, a participant can elect to defer... ", with no change to eligibility or entry dates.

[Kevin C]

There may be something in the document after the part you posted. Documents typically have sections dealing in some detail with participation upon rehire, so there should be more participation related provisions.

Our VS document lets you list a separate effective date for regular and Roth deferrals. Setting that to 10/1/2014 should accomplish what you want to do. You will want to check whether the plan uses entry date or full year compensation for determining employer contributions. You may need to change that depending on how they want the 2014 match calculated. If you are not sure, most document providers are willing to answer questions about how to fit certain provisions into their document.