I have a dental practice with a calendar year Safe Harbor PS Plan. The discretionary Profit Sharing contribution is made to employees who are employed on the last day of the plan year. A participant's employment was terminated on 12/21/07. This was also the last day the dental practice was open during 2007. All employees were off the remainder of the year.

Shouldn't this terminated participant be entitled to the Profit Sharing contribution? She's already received her 3% Safe Harbor contribution.

Thanks.

The "plan year" is generally a defined term in your plan document (which is a legal document). It typically is January 1st to December 31st. The fact that your operations were closed on and after Dec 21st has no bearing on the plan's definition of the year.

The solution would be to alter the employee's termination date to 12/31. This should have zero impact on other benefits like health insurance, etc.

Prudence may also dictate a review of the past, to see if any "precedent" exists.

I would also look at the precedent for "working" and "employed". In your case, all other employees were "employed" as of the last day, but simply not working due to office closing for last few days of the month. Would the employee that was terminated on 12/21 actually gone to work through 12/31 if the office had been open? If yes, maybe the true "last day worked" is 12/31.

This is really very simple. If the employee separated service on the 21st, and was issued their final compensation, they are not employed and don't get a contribution.

There is no basis for saying they were still employed without some documentation to that effect. If by some fluke, the employer paid them for holidays after that date, you might be able to argue that they were still employed during the office closure.