Can create a 2020 SHS plan early December

[BG5150]

I know of the 30-days rule for providing notices.

But what if someone decides in December to start a SH 401(k) plan?  Can they not do it?  What if it's the first week or two of the month?  Wouldn't that be like an "as soon as administratively feasible" situation?

[Larry Starr]

5 hours ago, BG5150 said:

I know of the 30-days rule for providing notices.

But what if someone decides in December to start a SH 401(k) plan?  Can they not do it?  What if it's the first week or two of the month?  Wouldn't that be like an "as soon as administratively feasible" situation?

Complete info PLEASE!  Is this a brand new plan? Is this an amendment of some sort to an existing plan?  What will be the effective date of the plan (oh, I just found it, but always but all the data in the body of your posting to make it easy on us).  What does SHS stand for?

If this is a new plan being set up in December for next year, then of course you can do it now.  Since you can actually do it until next October, the PRIOR December is just fine.  Are the facts different?

[BG5150]

Brand new plan.  Can I still have it effective 1/1 given the fact they won't have a 30-day lead time?

[Belgarath]

Yes. See 1.401(k)-3(d)(3)(ii).

[MWeddell]

30 days is a safe harbor period (i.e. you know for certain you complied) for distributing the notice.  If you distribute within less than 30 days, it may or may not be safe harbor; your client will have to be comfortable with uncertainty if the IRS were ever inclined to challenge it.

[Bri]

If it's that concerning on the 30 days, why not just make the deferrals effective 2/1 but the plan as a whole (for nonelective contributions or what-have-you) effective 1/1?

[Larry Starr]

On 11/29/2019 at 9:16 AM, BG5150 said:

Brand new plan.  Can I still have it effective 1/1 given the fact they won't have a 30-day lead time?

Yes; again, a new plan has until October to give the notice.  You are setting up a plan NOW for NEXT MONTH; you have until October to set up a new SH plan. You can set it up in, say, May, effective the prior 1/1, and you are still ok. What part of that is unclear?

[Larry Starr]

59 minutes ago, Bri said:

If it's that concerning on the 30 days, why not just make the deferrals effective 2/1 but the plan as a whole (for nonelective contributions or what-have-you) effective 1/1?

Because that is  completely unnecessary and not what any knowledgeable plan advisor would suggest.

[Bri]

Of course not, but a compassionate plan advisor would find an out for an uptight worry-wart prospect! ?

[Mike Preston]

This is not going to end well. 

[AKconsult]

Per Regulations:  If an employee becomes eligible after the 90th day before the beginning of the plan year, the notice is timely if it is provided no later than the date the employee becomes eligible.  So think about this in the context of a BRAND NEW plan.  If the plan is effective 1/1/20, then ALL employees will be eligible on 1/1/20, which is less than 90 days before the beginning of the plan year.  In which case, the notice just has to be provided no later than the date the employees become eligible (1/1/20).  

So, in other words, if it is a BRAND NEW PLAN, you don't have to apply the 30 day requirement.  You just have to provide notice by the first day of the new plan year.  

[Larry Starr]

20 hours ago, Bri said:

Of course not, but a compassionate plan advisor would find an out for an uptight worry-wart prospect! ?

"Trust  me; I'm your plan advisor".  What client even understand the notice issues????? None of mine.

[Kevin C]

It looks like two different questions are being answered here. One is when can deferrals be effective? The other is when can the plan as a whole be effective?   The cited 1.401(k)-3(d)(3)(ii) uses a definition of plan that includes mandatory disaggregation of 401(k) and 401(m) portions, so the timing of the SH notice for a new plan is based on when participants become eligible to defer.  The 1.401(k)-3(e)(2) requirement that the safe harbor be in effect for at least 3 months for the initial plan year of a new plan that is not a successor plan has been noted.  Deferrals can't be done retroactively, but there is nothing preventing a retroactive effective date for the profit sharing portion of the plan.