Publications
IRS Administrative Rulings and Developments
USERRA. The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) requires that plan sponsors credit employees with “make-up contributions” for certain periods of military service. USERRA applies to reemployments on or after December 12, 1994, but plan sponsors initially had until October 13, 1996 to bring their plans into formal compliance with the law. The IRS has now indicated that plan amendments should be made before the first day of the first plan year beginning on or after January 1, 1998 Uanuary 1, 2000 for governmental plans). The IRS has issued a model USERRA plan amendment for use by plan sponsors in bringing their plans into compliance.
Rollovers. The IRS has recently clarified that:
- plan sponsors may accept roll-over contributions on behalf of new employees that are not yet eligible to participate in the plan (because of the minimum age and service requirements) without jeopardizing the plan’s qualified status. A plan may accept a rollover on behalf of an employee who has not yet meet the minimum age and service requirement without having to take that employee into account for purposes of the § 410(b) minimum coverage test, § 401(k) average deferral percentage test, the § 401(m) average contribution percentage test or the § 416(c) top-heavy minimum contribution or benefit rules. Nonetheless, the right to make a rollover contribution must satisfy the nondiscriminatory availability rules of § 401 (a) (4).
- plan sponsors may accept what are subsequently determined to be invalid rollover contributions without disqualifying the entire plan, subject to two conditions. First, the plan administrator must have reasonably concluded that the contribution was a valid rollover contribution (e.g., the employee provided a letter from the prior plan’s administrator stating that the prior plan was a qualified plan). Second, if the plan administrator later determines that a rollover was invalid, the amount of the contribution, plus any earnings thereon, must be distributed back to the employee within a reasonable time.