When can plan compensation definition be amended for 414(s) testing?

Hi

Asking for a friend.

Existing 401k plan with SH and PS.

PS allocation requirement is: Either employed on the last day or accrue 500 hours of service.

Plan sponsor wants to exclude bonuses for 2024 for all purposes.

Can it be done now or has to be tested for participant who fall on either allocation requirement?

Thanks

well its too late for 2024 for deferrals and safe harbor.....

what method does the plan use for profit sharing allocations? if everyone in their own group - does amending the compensation definition really change anything? 

Would they even pass §414(s) if the compensation exclusion was in place? Sometimes its hard to pass. 

PS is everyone in their own group and yes amending will change as high payroll, high gateway

414(s) is not tested yet but from what I preliminarily calculated, right on the edge with the informal IRS mentioned 3% cushion

So a midyear change to a safe harbor plan that only is going to affect how much of their gateway minimum has to be fully vested? 

Bri, not understanding what you are saying.

My question is simply, can the definition of compensation be changed now without any 411d6 issue, gateway otherwise, given the allocation requirement.

Focusing on the PS allocation, if the allocation conditions say a participant who works more than 500 hours will get a PS allocation regardless of whether the participant is active at plan year end, then modifying the definition of compensation used in the PS allocation for a terminated participant in a way that reduces their PS benefit would result in a cutback of the accrued PS benefit for that participant.

I agree with Paul, you'll have anti-cutback issues.  

As justanotheradmin had brought up, is changing the comp definition in an "individual allocation class" plan, actually "going to do much"?  Especially if the gateway happens to be 5% of 415 pay anyway.  It "feels" like maybe you'd be reducing how much counts as SH, versus PS, out of the same overall floor total allocation for folks.

Jakyasar - what changes for the PS if you have comp excluded? does it actually change any amounts that someone gets? 

If not - amending that into the plan document for a future year - seems to add complexity that doesn't serve an actual purpose or change the contribution results or possibilities. If it is the HCE you want to receive less profit sharing, just give them less, as long as 401(a)(4) testing passes. With everyone in their own group, you don't need a change to the plan's definition of compensation to do that. 

Not relevant for this year - but for future years - 

Double check your plan document. If using a standardized document (as opposed to individual designed, or non-standardized) the basic plan document may preclude certain types of compensation exclusions particularly from safe harbor, not withstanding what can be written in to an adoption agreement, or actually allowed under the laws and regs.  Fine print is important. 

Hi all

All comments are appreciated and will pass along to my friend.