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Changing Pro Rata Profit Sharing Allocation to New Comparability Mid-Year


Vlad401k

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A Safe Harbor Match plan currently has no allocation conditions for Profit Sharing and the formula for Profit Sharing is defined as pro rata.

 

Can the plan change the formula to New Comparability - One Group per Participant mid-year?

 

No profit sharing has been funded to the plan yet in 2024 and the plan document defines the period for determining the amount of an allocation of Non-Elective Contributions as End of Plan Year.

 

Thanks.

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2 minutes ago, Vlad401k said:

currently has no allocation conditions for Profit Sharing

Well, the position of the IRS is that the existing formula gives the participants a "protected allocable share"  (i.e. IF an allocation is made for 2024, it must be pro-rata) and that such an amendment couldn't be implemented until 2025.

I've seen arguments that the IRS' position is inaccurate, but I wouldn't want to fight that battle

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1 hour ago, Belgarath said:

Well, the position of the IRS is that the existing formula gives the participants a "protected allocable share"  (i.e. IF an allocation is made for 2024, it must be pro-rata) and that such an amendment couldn't be implemented until 2025.

I've seen arguments that the IRS' position is inaccurate, but I wouldn't want to fight that battle

Agreed. If the plan had last day requirements, I would argue the other way.

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070

 

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