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Top Paid Group


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8 replies to this topic

#1 elang

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Posted 25 May 2010 - 05:48 PM

If I have 33 Eligible Employees and the Plan has a Top Paid Group Election; 20% = 6.6. Do I round up or down or do I have discretion?

Thanks in advance

#2 Below Ground

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Posted 25 May 2010 - 06:03 PM

I would round up.
Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

ERPA, QPA, QKA

#3 PensionPro

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Posted 25 May 2010 - 06:21 PM

Rounding and tie-breaking rules. In making the look-back year and determination year calculations for a determination year, it may be necessary for an employer to adopt a rule for rounding calculations (e.g., in determining the number of employees in the top-paid group). In addition, it may be necessary to adopt a rule breaking ties among two or more employees (e.g., in identifying those particular employees who are in the top-paid group or who are among the 100 most highly compensated employees). In such cases, the employer may adopt any rounding or tie-breaking rules it desires, so long as such rules are reasonable, nondiscriminatory, and uniformly and consistently applied. 1.414(q)-1T, A-3(b)
PensionPro, CPC, TGPC

#4 BG5150

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Posted 26 May 2010 - 08:25 AM

...so long as such rules are reasonable, nondiscriminatory, and uniformly and consistently applied. 1.414(q)-1T, A-3(b)

I'm guessing that "we ALWAYS use the method that benefits the testing" isn't considered ok even though it reasonable (it's an easy distinction), nondiscriminatory (it doesn't discriminate against HCE's) and consistent (it's always done).

;)

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.


#5 david rigby

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Posted 26 May 2010 - 09:37 AM

416 regs (adopted 12/31/84).
Is Q&A T14 relevant to your question?
I'm a retirement actuary. Nothing about my comments or advice is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, certainly not all the time, it might be reasonable to interpret my comments as actuarial advice.

#6 Mike Preston

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Posted 26 May 2010 - 09:51 AM

416 regs (adopted 12/31/84).
Is Q&A T14 relevant to your question?

OK, I'll bite. I don't see how.

#7 david rigby

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Posted 26 May 2010 - 11:05 AM

OK, I'll bite. I don't see how.

From the midde of A14 is this, "If 10% of the number of employees is not an integer, the maximum number of individuals to be treated as key employees by reason of being officers shall be increased to the next integer."

Is it reasonable to interpret this as the IRS's opinion that you should round up?
I'm a retirement actuary. Nothing about my comments or advice is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, certainly not all the time, it might be reasonable to interpret my comments as actuarial advice.

#8 Mike Preston

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Posted 26 May 2010 - 01:31 PM

Not in my opinion. It is reasonable to assume that since they previously published that language in 416, they knew of its existence. Therefore, the fact that it wasn't included in 414(q) means specifically that the rationale in 416 doesn't apply. IMNSHO.

#9 Guest_named_Sieve_*

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Posted 26 May 2010 - 02:00 PM

I agree with Mike, but for different reasons. The HCE rounding rules (including for top paid group) are in the HCE regs specifically (as quoted by PensionPro), and therefore are the only rules pertinent for HCE issues.

Good try, BG. High marks for creativity.