Amend SH Plan now to change PS method for '20?

[BG5150]

Can I amend a SH plan now to change PS method from pro-rata to new comp for 1/1/20?

[John Feldt ERPA CPC QPA]

Yes. You can even do it for 2019 if the PS has a last day requirement and they execute the amendment before 12/30.

 

edited to change 12/31 to 12/30

[BG5150]

Even for a SH Plan?

 

 

[John Feldt ERPA CPC QPA]

Yes. Take a look at IRS Notice 2016-16:

 https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=2ahUKEwjC5vPSlMXmAhVHZ80KHQiPBPsQFjAAegQIBRAC&url=https%3A%2F%2Fwww.irs.gov%2Fpub%2Firs-drop%2Fn-16-16.pdf&usg=AOvVaw0WCEJy-VYCn2e8f-i6FC6l

[Larry Starr]

4 minutes ago, BG5150 said:

Even for a SH Plan?

 

 

Cub Scout Feldt gave  you the correct answer in both responses.

[John Feldt ERPA CPC QPA]

Thanks! The photo is my son, actually. He's now an eagle scout and is already in college! Boy, time sure flies by when working on this exciting pension stuff!

[Larry Starr]

On 12/20/2019 at 4:29 PM, John Feldt ERPA CPC QPA said:

Thanks! The photo is my son, actually. He's now an eagle scout and is already in college! Boy, time sure flies by when working on this exciting pension stuff!

Super! Scouting was a very important part of my life early on. Was he in the Order of the Arrow?  I was Vice Chief of the Lodge for Nassau County Long Island at the end of the '60s.  Worked at scout camp for two seasons, and am now part of the camp staff "alumni organization" that raises money to help keep the camp going (very successfully reopened our closed camp a number of years ago).

[MWeddell]

On ‎12‎/‎20‎/‎2019 at 4:21 PM, BG5150 said:

Even for a SH Plan?

 

 

You are proposing to amend the portion of the plan pertaining to profit-sharing contributions, i.e. the employer nonmatching nonelective contributions.  Recalling that the 401(k) regulations use the word "plan" so that the 401(k), 401(m) and employer nonmatching nonelective contributions are three plans, you aren't even amending the safe harbor "plan" as that word is technically defined.  I don't think the restrictions on mid-year amendments even apply to your situation.

[Bird]

1 hour ago, MWeddell said:

You are proposing to amend the portion of the plan pertaining to profit-sharing contributions, i.e. the employer nonmatching nonelective contributions.  Recalling that the 401(k) regulations use the word "plan" so that the 401(k), 401(m) and employer nonmatching nonelective contributions are three plans, you aren't even amending the safe harbor "plan" as that word is technically defined.  I don't think the restrictions on mid-year amendments even apply to your situation.

I agree.  I'm guessing the question arises because of safe harbor notice requirements, and if I recall correctly, way back, it used to appear that you had to include language about how nonelective contributions were allocated, which might seem to preclude changes to said formula.  But I think it became clear some time ago that we could just reference the SPD.  

[Kevin C]

On ‎12‎/‎24‎/‎2019 at 9:27 AM, Bird said:

I agree.  I'm guessing the question arises because of safe harbor notice requirements, and if I recall correctly, way back, it used to appear that you had to include language about how nonelective contributions were allocated, which might seem to preclude changes to said formula.  But I think it became clear some time ago that we could just reference the SPD.  

The final regs effective in 2006 included this:

Quote

1.401(k)-3(d)(2)(iii) References to SPD. A plan will not fail to satisfy the content requirements of this paragraph (d)(2) merely because, in the case of information described in paragraph (d)(2)(ii)(B) of this section (relating to any other contributions under the plan), paragraph (d)(2)(ii)(C) of this section (relating to the plan to which safe harbor contributions will be made) or paragraph (d)(2)(ii)(D) of this section (relating to the type and amount of compensation that may be deferred under the plan), the notice cross-references the relevant portions of a summary plan description that provides the same information that would be provided in accordance with such paragraphs and that has been provided (or is concurrently provided) to employees.

 

[cdavis25]

What if that plan document was a standardized prototype document and had a last day or 500 hours.  Would you still be able to amend the Profit Sharing formula?  

[Larry Starr]

1 hour ago, cdavis25 said:

What if that plan document was a standardized prototype document and had a last day or 500 hours.  Would you still be able to amend the Profit Sharing formula?  

Well, I have to say it: anyone who used a standardized prototype document has done their client a disservice.  It's like tying one arm behind you back in a knife fight!

Having said my piece..... then, yes, you can still amend it.  However, it will take it out of the standardized prototype status.  Better to restate it to a regular volume submitter that allows fine tuning of the document and doesn't give away the store like a standardized prototype document does.  Frankly, I believe (and you can argue) that those documents were created for those who don't really know what they are doing.  We are custom tailors; that is an off the shelf K-Mart special suit!