401-k Plan Short Year

Is any date acceptable for a traditional 401-k plan to start a plan and have a short plan year?  (assume all notices have been given to employees).  Does it have to be beginning of month?  Quarter? or could for example, it be December 20th?  Thanks

I don't think there is anything magical about the first of the month. But you do have some prorated limits if you run a short plan year. Though i think those limits are prorated on month with any partial month treated as full month with 1/12th the limit.

Is there some reason you don't want a retro effective date to get the full 415 and 401(a)(17) limits? Like trying to keep out terminated employees so you pass coverage?

1 hour ago, Lou S. said:

I don't think there is anything magical about the first of the month. But you do have some prorated limits if you run a short plan year. Though i think those limits are prorated on month with any partial month treated as full month with 1/12th the limit.

Is there some reason you don't want a retro effective date to get the full 415 and 401(a)(17) limits? Like trying to keep out terminated employees so you pass coverage?

So is it allowable to have a retro date to January 2023?  That would be great to get the full limits.  I didn't know it could be backdated that far.....thanks.

19 hours ago, KevinMc said:

So is it allowable to have a retro date to January 2023?  That would be great to get the full limits.  I didn't know it could be backdated that far.....thanks.

Sure you can have an effective date of January 1, 2023. You just cant start the deferrals until after the plan is signed and you'll only be able to defer on pay earned after the 401(k) component was put in. But no problem having an effective date of 1/1 to get full 401(a)(17) and 415 limits, especially if they are also making a PS contribution.

If you have NHCEs and/or non-Keys testing and top heavy are both issues you'll need to consider. And too late to do a safe harbor plan for 2023.

And never use the word backdate; that implies you are doing something illegal. You are establishing a plan witn a retroactive effective date.