8 replies to this topic

[elang]

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

[Below Ground]

I would round up.

[PensionPro]

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)

[BG5150]

...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).

[david rigby]

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

[Mike Preston]

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

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

[david rigby]

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?

[Mike Preston]

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.

[Sieve]

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.