Failed coverage, no fail-safe

[BG5150]

Plan fails coverage, with no fail-safe language.  In my document I see the protocol for letting people in when there IS fail-safe.  But how do you correct it if there is no such language?  Do I need an 11-g amendment?

[Mike Preston]

Yes, that is one of the purposes of an 11(g) amendment.

[CuseFan]

agreed. also, doing the amendment versus having the failsafe provision gives you some flexibility on how to fix, which could help keep the cost down. however, if you fix by including terminated participants that were previously excluded from the allocation you'll likely need to fully vest that contribution for those people.

[Tom Poje]

as i recall, one of the reasons for not including failsafe language is the 'cost'. if you include such language, then you sacrifice the avg ben test. in other words, you could fail the ratio test of coverage at 60% but still pass avg ben test and therefore pass coverage. but if you have fail safe language you get no farther than ratio % fail, now bring someone in (without having an amendment because we tell you who or how in the document)