Last Day of Quarter provision on match

[austin3515]

Using last day of quarter rule on matching contributions. Would it be permissible to have as an allocation condition that states you are not eligible for the matching contribution unless you are actively employed 15 days after the last day of the quarter? So employment on 4/15 for the quarter ending 3/31.

We are trying to avoid people requiring residual distributions after the match is funded.

[jpod]

I can't put my finger on anything specific, but there may be a problem with it for the last quarter, i.e., imposing a post-plan year condition on a plan year contribution.

Aside from that, is there a reason to believe that having that 15 day requirement will accomplish anything more than a last-day-of-quarter requirement?

[Kevin C]

We are trying to avoid people requiring residual distributions after the match is funded.

It might be easier to use the de minimis change in timing rules in 1.411(d)-4 Q&A2 (b)(2)(ix) to change distribution timing to be after the match has been funded. You are allowed to change the distribution timing by up to 2 months.

[austin3515]

It's much easier not to put the money into the plan. Not to mention it saves them money.

[ESOP Guy]

It's much easier not to put the money into the plan. Not to mention it saves them money.

Then have a last day of the year requirement and fund it after the last day. That would seem to save more money then quarterly last day language.

However, I don't see a problem with quarterly last day. I too am unsure of 15 days after the end of the quarter.

[austin3515]

Then have a last day of the year requirement and fund it after the last day. That would seem to save more money then quarterly last day language

. Who can explain why clients want the things they want, but they do want them and that is that.

Corbel blessed the 15 days after the end of the quarter language so that works for me

[Belgarath]

Austin - is the Corbel doc you are going to use a VS in AA format, or IDP? Just curious, as I have to say the concept makes me a bit squeamish. I wonder what the IRS would say if you filed for a DL? Did Corbel provide any citation to support this being allowable?

[austin3515]

VS in AA format, I used the "Other filed"

[austin3515]

P.S. here are the parameters for Other and I have not violated any of them.

must be definitely determinable, not subject to Employer discretion and may not require more than one Year of Service (or Period of Service if the elapsed time method is selected))

[Bird]

...the concept makes me a bit squeamish.

I agree. This would apply to contributions for the last quarter as well, so someone could be eliminated from a 4th Q contribution by not being employed on Jan 14? Wow.

[austin3515]

Pretty cool, right? Hey listen, if you can provide me something that says this won't work I'll reconsider, but my file contains the requisite approvals to make me comfortable.

[jpod]

Respecting the plan year concept, I have to think it must be definitely determinable by the end of the plan year. Again, i haven't researched it, but i wouldn't be surprised if there isn't some old IRS guidance out there that prevents you from imposing post-plan year conditions on a plan year allocation.

[austin3515]

Please share if you find it!

[Belgarath]

Hey Austin - did Corbel provide any analysis/citations, or was it just more of, "Yeah, we think what you have proposed is ok" ???

Thanks, and a Happy Holiday Season to everyone!!

[ESOP Guy]

. Who can explain why clients want the things they want, but they do want them and that is that.

The person who can explain that might have a chance to explain women to men!!!

[Bird]

must be definitely determinable, not subject to Employer discretion and may not require more than one Year of Service (or Period of Service if the elapsed time method is selected))

Just because it fits those parameters doesn't mean it is ok. Would you add something that says "must be over (or under) age 50"?

[austin3515]

Just because it fits those parameters doesn't mean it is ok. Would you add something that says "must be over (or under) age 50"?

No because that violates age discrimination laws. There's lots of things I wouldn't do because it was illegal, no need to limit the examples to just age

[Kevin C]

It may be allowed, but it could make your 415 limit testing interesting. The 4th quarter 2015 match will be an annual addition for 2016.

1.415©-1(b)

(6)Timing rules (i)In general

(A)Date of allocation.—

For purposes of this paragraph (b), an annual addition is credited to the account of a participant for a particular limitation year if it is allocated to the participant's account under the terms of the plan as of any date within that limitation year. Similarly, an annual addition that is made pursuant to a corrective amendment that complies with the requirements of §1.401(a)(4)-11(g) is credited to the account of a participant for a particular limitation year if it is allocated to the participant's account under the terms of the corrective amendment as of any date within that limitation year. However, if the allocation of an annual addition is dependent upon the satisfaction of a condition (such as continued employment or the occurrence of an event) that has not been satisfied by the date as of which the annual addition is allocated under the terms of the plan, then the annual addition is considered allocated for purposes of this paragraph (b) as of the date the condition is satisfied.

[austin3515]

That actually helps my position, thanks! 415 should not be an issue as anyone who meets the conditions will have comp in the following plan year. Thanks!

[mbozek]

I don't see how a 15 day delay in a 4th qtr contribution could meet the requirement that the annual contribution is mandatory for participants employed on the last day of the plan year. Are you saying that as long as quarterly contributions are made they will always meet the requirement for making contributions for participants employed on the last day of the plan year?

[austin3515]

I'm saying that if they meet my requirements that they will necessarily have comp paid in that quarter and therefore will not have any excess contributions under 415. the match is pretty small so even one paycheck would give me plenty of cushion.

[Bill Presson]

So, if I'm in the plan in 2013 and I work all of 2014 AND work 10 days into 2015, I still don't get the full match?

[austin3515]

you get the match for the first 3 quarters, but not the 4th quarter. I'm sure "that's not fair" isn't your argument

[Bill Presson]

you get the match for the first 3 quarters, but not the 4th quarter. I'm sure "that's not fair" isn't your argument

No. I'm just trying to wrap my head around being employed 365+ days and not qualifying.

[rcline46]

I would tell the client that such a provision involves a major change to the document and MUST be submitted to the IRS for approval, and the fees for doing such, especially the quarter ending on the plan year end.

However, what says your quarters have to match up to plan year quarters, so that this is not an issue?

[Belgarath]

Hi Austin - just re-asking my question: did Corbel provide any analysis/citations, or was it just more of, "Yeah, we think what you have proposed is ok" ???

[austin3515]

I actually sent him the 415 site above and said "here is regulatory support for your answer" and he said "thanks for sending this."

[Peter Gulia]

Without wading into a discussion about whether the provision is or isn't disqualifying, here's a related question for some of us to ponder:

Imagine a user asks for the volume-submitter publisher's assurance that what the user has written is sufficiently within the adoption agreement's form and instructions and does not lose the user's reliance on the IRS's letter issued to the volume-submitter publisher. The publisher gives the user that assurance, putting it in writing. Later, the IRS tax-disqualifies the plan. (Assume, hypothetically, that the IRS is unquestionably correct, and the publisher was unquestionably wrong.) Is the publisher liable to the user? Or would a court say that it cannot have been reasonable for the user to rely on the statement of a person that is not an accounting, actuarial, or law firm and warned the user that it does not render tax or legal advice?

I know how this would settle with the IRS and in the business world. But if such a situation didn't settle and instead were litigated fully, would the volume-submitter publisher be liable on its assurance?

[GMK]

^ My guess is that the court would give considerable weight to the wording of the CYA clauses the publisher included in its letter of assurance.