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I have a client that sponsors a 401(k) plan & has been allowing employees the option to have 401(k) deferral elections applied to their bonuses. The plan document states that Bonuses are subject to the same deferral election as regular wages. Can this failure be self-corrected under Rev. Proc. 2019-19 by adopting a retroactive amendment to allow special elections for bonuses? Would this amendment be considered an increase in a benefit, right or feature?

Posted
1 hour ago, Bird said:

Does the plan allow participants to change their election with each payroll?  If so, you might not have a problem at all.  

This is why I recommend allowing changes each payroll. Employers are so wary of this, but it's very rarely an issue.

The only way this might not fix the issue is if the bonuses are paid on a regular paycheck and not separately.

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070

 

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