Last Day Rule but Wants to Allocate Terminated Participants

I have a client that wants to fund a discretionary profit-sharing contribution and would like to include terminated participants. The plan has the last day rule. Can this be done by adding language to the declaration? It is not taking any benefit away from active participants such as lowering the allocations they are receiving.

This doesn't come up very often, so I appreciate any insight.

I think you can do this with an 11g amendment. Most likely anyway. Note that the deduction will be deferred for one year.

Hi Mike, good to know the 11g amendment can allow this. In regards to the tax deduction being deferred, why is that if they are funding prior to their 2021 tax due date?

Because the IRS says so? It is what it is.

That is exactly what I want to confirm. Where does the IRS state that? And is it for the full profit sharing contribution, or for those that the 11g amendment is affected by? 

Please note that I appreciate your expertise on this matter. i need to be able to show proof to the trustee about these facts.

Thank you!

404o isn't effective retroactively. Read 11g to confirm.

I found an old post regarding this which you were a part of. It's a classic nice read. Question: If one of the termed NHCEs was brought in to satisfy coverage failure, and 4 remaining termed NHCEs were brought in because the client wanted all NHCEs to receive an allocation,  then the  one NHCE brought in to pass coverage would be deductible with the rest of the profit share for plan year 2021, and the additional 4 would be deductible for the current plan year 2022. I am assuming this is correct.

Could you post a link to the prior discussion? And you are wrong. All five are treated identically

The link to that discussion is here: https://benefitslink.com/boards/index.php?/topic/62590-11g-amendment/page/2/#comment-320881

The plan document tells me that, to pass coverage testing that is failing, you must bring in NHCEs to the point of passing, and the last day rule does not apply. So, this is not an amendment, but simply following the terms of the plan. 

Apples and oranges. We were talking about being brought in via an amendment. Now you are bringing one person in through plan document provisions already in effect.

 I mentioned a few posts up that one NHCE was brought in because of coverage testing failure. I failed to mention about the remedy for this written in the plan document. Client now wants to give an allocation to all 5 termed NHCEs. Basically the one that was brought in because of testing failure can be included as part of the 2021 tax deduction, but the 4 remaining NHCEs would be tax deductible in 2022 since we would need an 11g to bring them in.

I appreciate your help in this. 

16 hours ago, Logan401 said:

4 remaining NHCEs

Is this just so all terms get the PS or is it also to satisfy nondiscrimination testing? If the latter, those contributions would need to be vested (whether fully or partially has been debated in the this forum before). That is, you can't 11g amend to provide a contribution to pass testing that will just be forfeited after it is made.

One to satisfy coverage testing, the remaining for "just because". You are correct though. If it was to pass 401(a)(4), there must be economic substance.