What is the first day of the Plan year? New Plan effective 8/1/00, bu

[Guest michaelv]

A Company starts a 401(k)Plan 8/1/00. However, (either intentionally or unintentionally), their is no provision for an initial short plan year. Plan year is defined in the document as 1/1 - 12/31. References to compensation include periods prior to 8/1/00.

Does this mean that all eligible employees became participants on 8/1/00 or 1/1/00? Should the 2000 5500 indicate a 1/1/00 Plan effective date?

Thanks for any comments.

[AndyH]

Seems to me the answer to both questions is yes, if the document defines those as the entry date.

I don't see this as an uncommon situation.

[Guest]

I agree this is not unusual, however since it was a 401(k) plan, they may have botched up the opportunity to use prior year testing values.

[Guest michaelv]

I see your point, but in these cases, wouldn't it be more straight forward to just make the plan effective 1/1/00? I'm getting tangled up with the matter that the first day of the plan year can be prior to the effective date of the plan, which seems unnecessarily akward, if the plan was made effective 1/1/00.

Thanks for your opinions.