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Eligibility for participants who are fired before elective deferrals allowed.


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Posted

If a plan has a start date of 1/1/2022 but elective deferrals are not allowed till 12/21/2022 and eligibility emails were sent out on 11/21/2022 for participants to determine their contribution %'s. If an employee was fired on 12/1/2022 are they considered participants in the plan or because they were fired prior to the first elective deferral being allowed are they not considered participants? If they employee has to make a safe harbor contribution to save the plan would that employee receive that distribution? Also will they be considered in the calculation of ADP and ACP? 

Posted

The employee was never eligible to make elective deferrals, so the employee is not included in the ADP and ACP tests assuming that there was no trailing regular compensation paid on 12/21/22 or later.

There's no such thing as making a safe harbor contribution for a plan with an ADP test, so I'm confused about your facts.  If there is a safe harbor nonelective contribution, it wouldn't be required by the safe harbor regulations, but your plan document may require it.

Posted

If the plan has to make a QNEC or a QMAC would they be considered eligible to receive on of those? Or is it possible to have a requirement to be employed at the end of the year to receive a QNEC or QMAC? 

Posted

Depending on what your plan document states, it is possible that a QNEC or QMAC is allocated only to those employed on the last day of the plan year.  The plan document should contain a definite predetermined allocation formula for QNECs and QMACs, although I have frequently seen plan documents that omit that formula and still have obtained favorable determination letters.

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