ldr Posted April 30, 2021 Posted April 30, 2021 Good afternoon to all, Is it acceptable to amend a plan for the prior plan year (PYE 12/31/2020) in the next year (now) to remove a year-end service requirement in order to pass Gateway and therefore provide a profit sharing contribution to an NHCE that wouldn't otherwise be eligible for that allocation? Seems to me the employees would benefit (more) if permitted. Or, is this only allowed to fix a failed coverage test? Thank you in advance for your thoughts on this.
C. B. Zeller Posted April 30, 2021 Posted April 30, 2021 Yes, you can use the corrective amendment rules of 1.401(a)(4)-11(g) to correct a failed non-discrimination test. However please read your plan document carefully. Most plan documents I have seen provide for an automatic waiver of the last day and/or hours of service requirements as needed to pass the gateway test. This would usually apply only if the participant was otherwise eligible for a contribution that would require them to be included in the test, such as a top heavy minimum or a safe harbor non-elective contribution. Bill Presson, ugueth and Luke Bailey 3 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co
ldr Posted April 30, 2021 Author Posted April 30, 2021 @C. B. Zellerthank you. You are right. The document does indeed give permission to bump up a 3% TH person to 5% or whatever it takes to pass the Gateway.
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now