Monthly allocations?

[jkharvey]

Employer wants to allocate discretionary p/s contributions monthly. I want to know what problems this could present. Seems to me we may have to use the general test to determine if contributions are discriminatory on annual basis. Any thoughts?

[Guest]

1. its impossible to allocate monthly if plan is integrated, since you have no exact comp yet.

2. if there is a last day provision/hours requirement you are giving ees a contribution they may have not earned.

you have to be real careful about this, especially if the ee is getting monthly or quarterly notices. -how can you tell someone they have accrued soething and then take it away.

3. even if you 'take it away' so to speak, that contribution has earned money and you have to somehow figure that as well.

4. if it is a safe harbor contribution then it shouldn't matter since there are no last day or hours requirement.

[david rigby]

Tom is correct. There have been several discussion threads relating to how to fix such problems after the fact. Contributing the PS amount on a monthly or quarterly basis is much different from contributing and allocating, although the former can have its own set of potential problems.

BTW, if it is discretionary, then it is often related to profits, which might also be difficult to predict.

[jkharvey]

It is discretionary based on objectives. There is no last day or year of service requirement to receive the contribution.

It is not integrated.

The ER wants to do more than contribute monthly, he wants to actually determine the amount and allocate based on monthly amounts.

I really appreciate all of your comments.