Small plan with short plan year starts making deposits late.

[kwalified]

Calendar year small plan had a short plan year in its first year(10/1-12/31). However, deferrals/match did not commence until the first payroll in November. No QACA or auto enrollment, just basic safe harbor match. Regardless of whether the plan sponsor failed to permit or implement a deferral election, the correction will be made by QNEC or is there an issue with the fact the plan while in existence legally for 3 months was not funded for 3 months?

[Doghouse]

I think the other significant issue is whether the plan blew its safe harbor status by not being in effect for at least 3 months - if it was relying on that "new plan" exception to the full year requirement for safe harbor. I believe the rules say that the participant must have the opportunity to defer for at least 3 months.

[Bird]

It's not something I'd worry about. I'd be a little more comfortable with it being a safe harbor nonelective, but overall, it sounds like they tried reasonably hard and at some level you have to wonder if it's worth the effort to do anything.

[kwalified]

It's not something I'd worry about. I'd be a little more comfortable with it being a safe harbor nonelective, but overall, it sounds like they tried reasonably hard and at some level you have to wonder if it's worth the effort to do anything.

What would you not worry about?

Would you worry about it if they had a SIMPLE IRA in place too after being formally advised more than once that they could not?

[Bird]

What would you not worry about?

Starting actual deferrals on Nov 1.

Would you worry about it if they had a SIMPLE IRA in place too after being formally advised more than once that they could not?

Um, yes!

[Doghouse]

I, on the other hand, would worry about it.

[kwalified]

Should have said "no thanks" to this one. Lost money first year in on two plan years worth of "excitement". I reckon the SIMPLE IRA issue is on them and they can VCP if they choose to. Only 1 participant (family member) actually contributed to both. Regarding the late sign up of participants, either QNEC or throw your hands up to an auditor if they don't want to fund it. Think I will have an adult beverage(s) this weekend.