suspensions vs stopping elective contribution

[thepensionmaven]

Participant wishes to suspend her contributions for a few months, not a complete stoppage of contribution.  She has not taken a hardship distribution.

Plan allows for quarterly changes.

I assume there needs to be a deferral change form to lower her % to 0% as per plan provisions for a change.

She would have to wait until the next quarter to resume contribution with a new change form to bring her % back?

If so, if she wishes to resume contributing sooner, the plan must be amended on a prospective basis, to allow more frequent election changes?

 

 

[ERISAAPPLE]

What does the plan say?  If it allows participants to submit a new form once a quarter, why can't the form say stop for two months (or however long she wants) and then start again when the two months (or however long she wants) has ended?

 

 

[Bird]

18 hours ago, thepensionmaven said:

Participant wishes to suspend her contributions for a few months, not a complete stoppage of contribution.

I don't think there's any difference between "suspending for a few months" and "stoppage and starting again in a few months."  I don't think any plan would require ceasing contributions to be permanent (!).

We allow changes each payroll period - IMO, it's easier/cleaner and does not lead to more activity.  As noted above, you have to see what the plan says.  Some (most?) will allow a stop at any time and a "change" quarterly, monthly or whenever.  You do not have to amend the plan to do whatever she wants, just make sure that what she does complies with the document.

 

[RatherBeGolfing]

18 hours ago, thepensionmaven said:

Plan allows for quarterly changes.

I assume there needs to be a deferral change form to lower her % to 0% as per plan provisions for a change.

Yes.

18 hours ago, thepensionmaven said:

She would have to wait until the next quarter to resume contribution with a new change form to bring her % back?

Yes.

4 minutes ago, Bird said:

As noted above, you have to see what the plan says...  You do not have to amend the plan to do whatever she wants, just make sure that what she does complies with the document.

100% this

[MWeddell]

19 hours ago, thepensionmaven said:

If so, if she wishes to resume contributing sooner, the plan must be amended on a prospective basis, to allow more frequent election changes?

 

 

If she is a highly compensated employee, note that the timing of the amendment may be discriminatory.

[Patricia Neal Jensen]

Most important as frequently stated above:  What does the plan say?  Almost all plans address this situation.  Most of our plans are drafted to permit ceasing a contribution (I agree.... there is no such thing as "suspending." ) anytime.  Most are also drafted to permit restarting at any time but some plans do require that the participant reach an entry date (appears to be quarterly in this instance) to restart.  Changing this requires a plan amendment because you will have to change whatever is in the plan now.  The employer must follow whatever is written in the plan document!

[thepensionmaven]

Datair VS.

The plan allows for quarterly changes, a participant can stop at any time.

I take "stop" to mean completely stop, ie not contribute to the plan anymore; and "suspend" more as a "stop and go".

Apart from hardship, the plan does not use the word "suspend".

Aparently this NHCE stopped January-February, resumed in March-April and wants to stop again in June.

I think amending the plan is in order.

[Tom Poje]

ft William has

4. Modifications of Elective Deferrals

a. Participants modify/start/stop Elective Deferrals/Voluntary Contribution elections:

i. [ X ] Each pay period

ii. [ ] Monthly

iii. [ ] Quarterly

iv. [ ] Semi Annual

v. [ ] Annual

vi. [ ] Pursuant to Plan Administrator procedures (at least once each calendar year)

b. [ X ] Participants may stop an election to contribute at any time.

 

I would not read to mean 'stop' forever otherwise [a] means 'this only refers to someone who has never stopped previously

 

the verbiage in the document is clearer as it uses the word suspend (remember the checklist is somewhat shorthand)

(b) Modifications. As of the date a Participant first meets the eligibility requirements of Section 3.01, he may elect to contribute to the Plan. Subsequent to that date, a Participant may elect to start, increase, reduce or totally suspend his elections pursuant to this Section 4.01, effective as of the dates specified in the Adoption Agreement.

[Bird]

19 hours ago, thepensionmaven said:

Datair VS.

The plan allows for quarterly changes, a participant can stop at any time.

I take "stop" to mean completely stop, ie not contribute to the plan anymore; and "suspend" more as a "stop and go".

Apart from hardship, the plan does not use the word "suspend".

Aparently this NHCE stopped January-February, resumed in March-April and wants to stop again in June.

I think amending the plan is in order.

I'm not sure why you would think "stop" means stop forever but it does not.

Did(n't) you read replies about following the terms of the plan?!  Why would you want to amend the plan instead of just telling this person "sorry you have to wait until July to re-start?"

[RatherBeGolfing]

As far as Im concerned, the usage of "stop" or "suspend" doesn't matter.  For our purposes, both of them means deferrals cease when the participant elects to do so.  As an administrative matter, I wouldn't start (or restart) deferrals until the participant enters into a new deferral agreement, so stop/suspend simply means stop at this point and nothing more. 

Most of my plans are drafted to allow for changes every payroll.  I have a few plans that restrict it to quarterly but that is about it.  If it makes sense to go with payroll period changes rather than quarterly, then amend away, but you certainly don't have to just because a participant might want it.

[thepensionmaven]

In reply to Bird, yes I read the above, and yes, the plan calls for quarterly changes.

I was speaking hypothetically if the client wanted to go with monthly changes, the plan must be amended.