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Gateway Contribution Eligibility


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7 replies to this topic

#1 MBCarey

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Posted 05 December 2003 - 11:41 AM

I'm real confused. I recently attended a Corbel Seminar on Cross Tested plans, and I was sure that I heard that in a New Comparability Plan with a 3% Safe Harbor Contribution you could not have a last day requirement. Is this true.

#2 pmacduff

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Posted 05 December 2003 - 12:07 PM

You can't have a last day/1000 hours requirement for the safe harbor piece. You can still use 1000 hours and last day on your new comp profit share piece just like any other profit share so long as it is in the document.

#3 Richard Scheer

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Posted 05 December 2003 - 12:23 PM

yes, but chances are those participants who terminated before the end of the year and received the SH contribution, will now have to receive the gateway minimum.

#4 pmacduff

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Posted 05 December 2003 - 01:57 PM

Sorry for the oversight, Richard is correct. For all intents & purposes, you can't have a last day/1000 hours rule in a 3% safe harbor new comp plan. If you subscribe to ASPA ASAP, there is a good newsletter on this subject (December 13, 2002 02-24). An interesting item in the article is to draft the plan document new comp formula so that all those participants in the safe habor 3% or top heavy 3% only category are in their own group. That way you can give them only the gateway in the event that the other NHCEs end up needing a higher % and more $ to pass non-discrimination testing. If you like, I can e-mail or fax you a copy. Patti

#5 Blinky the 3-eyed Fish

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Posted 05 December 2003 - 03:15 PM

Although they accomplish the same thing, I prefer an overriding provision that works much like the TH minimum language, to allow those that need to get the gateway minimum to receive such.
"What's in the big salad?"
"Big lettuce, big carrots, tomatoes like volleyballs."

#6 pmacduff

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Posted 05 December 2003 - 03:33 PM

Blinky - My thought with the separate rate group: I have an Employer who can maximze the owners @ $40000 with a new comp formula but needs to give 7% to the lower group to pass testing. If I have my safe harbor 3% terminees & top heavy only people in a separate group, it is my understanding that I can give them 5% and the rest 7% (provided the tests still pass) thereby saving some $. I believe if they weren't in a separate group from the other NHCEs, they would have to also receive 7%. Does that make sense? Am I correct in that assumption? As you mentioned, would the overriding provision also accomplish this goal or would I have to give the 7% to all NHCEs? I have many smaller Employers with new comp cross tested formulas that, of course, want to maximize the owners at the lowest possible allocation to the balance of their participants. That is why the separate rate group idea caught my eye.

#7 Blinky the 3-eyed Fish

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Posted 05 December 2003 - 04:04 PM

The overriding provision would achieve the same goal. It works exactly like TH does and that has worked for years.

It would go like this:

Last day and 1,000 hours requirement for cross-tested regular PS contribution of 10%. A participant who doesn't meet the hours requirement would be required to get the TH minimum under the terms of the plan. Additionally, the overriding gateway terms of the plan would move this person to 5% / 1/3.

Same concept for safe harbor nonelective if a participant does not work 1,000 hours or last day. Overriding gateway language moves his allocation up to the gateway amount.

We have had TH language in all our documents, so why differ from that concept of having a simple overriding provision for gateway is all I am saying. But again, your way would work too. I just have a preference.
"What's in the big salad?"
"Big lettuce, big carrots, tomatoes like volleyballs."

#8 Tom Poje

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Posted 05 December 2003 - 04:18 PM

Good news!
we just created a new document using Corbel.
the language for the gateway minimum is now in there, so that will cover you for the future on new plans. I believe for plans in existance you adopt the snap on amendment for the gateway. It is there!

bah. I must find a way to stop filing dead lines from coming