covering past employees

[gregburst]

Consider a calendar-year SHNEC plan that is effective 1/1/15 and the document is signed 9/1/15.

Does the plan have any obligation to a long-time employee that terminated 8/1/15?

Is this employee included or or ignored in the contribution and nondiscrimination calculations?

Is the answer different in the world of DB plans? Must a DB plan that is signed on 9/1/15 with an eff date of 1/1/15 benefit an employee that left on 8/1/15?

[My 2 cents]

If a DB plan is effective 1/1/15, even if the plan is signed on 9/1/15, how could it not cover people who did not leave until 8/1/15?

[david rigby]

Might the plan's vesting definitions make this irrelevant?

[Mike Preston]

SHNEC! Vesting?

[david rigby]

referring to the DB question.

[Mike Preston]

Ah, OK.

[Tom Poje]

disregarding the safe harbor plan for the moment, there is certainly nothing to stop me from putting in a profit sharing plan on 12/31/15 and having an effective date of 1/1/15 and thus a long time employee entering in that date. (at least as far as I understand the rules)

.............

now lets look at the question in hand, lets add the 401k feature and use the date of 9/1/15 as you described as being the date things 'started'.

can anyone defer on comp earned before 9/1? Not according the regs.

in fact, if someone terminated before that date and you used comp from date of participation for the ADP test[i realize it is safe harbor and there is no ADP test, but bear with the argument] (which for the 401k portion would be 9/1) they would have comp of 0, and the IRS has generally suggested such people are excluded from the test.

the regs only require the safe harbor for each 'eligible employee' (1.401(k)-3(b).

under the definitions of 1.401(k)-6 an "eligible employee" is an employee who is directly or indirectly eligible to make a deferral election for all or part of the year.

If this person was not able to do so because they terminated, even if the doc said use comp for the entire year for the safe harbor, I don't see the regs as saying this person falls into the 'required to receive', but of course without knowing the exact verbiage in the document I can't say more than that.