3% Safe Harbor and 401k

[mjf06241972]

Participant enrolled 2 employees early in 401k and plan is 3% non elective safe harbor.  Do they refund 401k or can they make 3% non elective safe harbor and keep 401k.  This is only employer contribution to plan.

[Mike Preston]

You want to try that again in English this time?

[Tom Poje]

it sounds like  you said 2 people were let in earlier than they should have been, if so

this is correctable under EPCRS Appendix B 2(07)(3)

 

(3) Early Inclusion of Otherwise Eligible Employee Failure. (a) Plan Amendment Correction Method. The Operational Failure of including an otherwise eligible employee in the plan who either (i) has not completed the plan’s minimum age or service requirements, or (ii) has completed the plan’s minimum age or service requirements but became a participant in the plan on a date earlier than the applicable plan entry date, may be corrected by using the plan amendment correction method set forth in this paragraph. The plan is amended retroactively to change the eligibility or entry date provisions to provide for the inclusion of the ineligible employee to reflect the plan’s actual operations. The amendment may change the eligibility or entry date provisions with respect to only those ineligible employees that were wrongly included, and only to those ineligible employees, provided (i) the amendment satisfies § 401(a) at the time it is adopted, (ii) the amendment would have satisfied § 401(a) had the amendment been adopted at the earlier time when it is effective, and (iii) the employees affected by the amendment are predominantly nonhighly compensated employees.

....

at one time I think you were supposed to request a determination letter, but since the IRS has pretty much ended that requirement in most cases I doubt they care in the case of EPCRS correction

[mjf06241972]

Thanks Tom. This is great.  

[thepensionmaven]

So, in essence, what would the proper language look like? 

[ACK]

Pensionmaven, At the 2017 NIPA conference, the speaker said that this type of amendment should be accomplished by amending on the prototype document (assuming that is what the plan uses), NOT as a stand-alone amendment, although I have seen it done both ways.  

If amending the prototype document, you would just use your document software to create an amendment to write in a one-time entry date for the specific affected individuals.  

[Belgarath]

Perhaps something along these lines, in the "other" option, or whatever you have available in your particular Adoption Agreement. Tailored, of course, to your specific situation. And just for safety, I'd have similar language in the Resolution adopting the amendment.

Effective (date), the normal service and entry date requirements are waived for (name(s)) ONLY, for all contribution types. This special retroactive amendment is for correction under Revenue Procedure 2018-52.