New small S.H. 401(k) effective date 6/1/15, no deferrals until too late?

[Lori H]

New plan executed their plan document effective with a 6/1/15 date, but did not start withholding until October, which also violates the 3 month requirement I believe. What is the proper procedure? Amend the effective date?

Thanks

[Lou S.]

October, November, December is 3 months right?

Did no one signup until now or did they just get around to doing the enrollments now?

[Lori H]

They did enrollments this month, with deferrals to commence next payroll I believe. Maybe 10 participants tops.

[Lou S.]

I'm not sure what the "proper" procedure is but I would think you don't get SH relief for the 1st plan year since you "effectively" don't have 3 months of deferrals and would be subject to ADP/ACP testing and TH minimums, if applicable.

Perhaps someone else has been in this position before and can offer better info than I can.

[ETA Consulting LLC]

Well, if the document was executed in June and the eligible employees were provided "timely" safe harbor notices "concurrent with the 1st 90 days", then the safe harbor would appear to remain in tact. It would appear as if the failure would be in not enforcing the participants' elections (or rights to defer) in a plan that just happens to be safe harbor.

Depending on the actual series of events, it may go either way.

Good Luck!

[Lori H]

The plan sponsor would be subject to the penalty if the participants elected to with hold and none occurred. Not sure if SH notice was issued or SPD. I do know sponsor received and executed the document.