New plan with partial year safe harbor provisions

[cpc0506]

New plan is effective 1/1/2014 with a special elective date of 10/1/2014 for deferral and safe harbor provision (3% non-elective.) Definition of compensation includes compensation which NOT a participant. What compensation is used to determine the 3% safe harbor contribution? Is it the compensation as of the effective date of the safe harbor provisions or full year?

Take that question one step further, an employee is eligible for this plan 1/1/2014 (met service and age requirements prior to the start of the plan), but this employee terminated employment 6/1/2014 (prior to the effective date of the safe harbor provisions.) Is the client required to give this terminated participant a safe harbor contribution?

[GMK]

Definition of compensation includes compensation which NOT a participant.

Something is missing here, maybe?

[cpc0506]

I think you need to read my second question first to see where I am having an issue.

[John Feldt ERPA CPC QPA]

You're saying the plan includes compensation prior to date of entry (includes compensation while NOT a participant), right?

So allocations in the plan are determined based on full plan year compensation, even if the participant becomes eligible on, say, October 1, 2014.

Since the plan overall is effective as of 1-1-2014, but safe harbor is only effective starting 10-1-2014, it seems to me the participant is eligible for the plan, but is not eligible for safe harbor (they did not meet the safe harbor entry date - they also could not defer).

If they were still around on October 1, then they are eligible for safe harbor (and deferrals) and the safe harbor then would be allocated using full plan year compensation, including wages prior to 10-1-2014.

What does your plan document provider say?

[cpc0506]

I have sent this question to our document provider and am waiting for their reply.

[John Feldt ERPA CPC QPA]

Okay. Please post their view on this after they respond - thanks!