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QACA Safe Harbor Match & Testing

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2 replies to this topic

#1 justatester


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Posted 16 May 2011 - 11:42 AM

My plan has immediate eligibility for pretax and 1000 hours for match. I have that have less than a year of service and of course one of them contributes. I am trying to figure out how to run my test. Our initial thought was anyone who is match eligible be tested in the "Main" group...but this is easier said than done...So here our my options I think?

1) Based on 12 mos/semi entry: 3 HCEs-only one of which is match elgible. Run ADP/ACP test which both pass. Run coverage in the same manner

2) Treat the plan as those who are match eligible vs those who are not match eligible. Run coverage the same way.

Please let me know your thoughts!

Thank you in advance!!

#2 Tom Poje

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Posted 16 May 2011 - 02:10 PM

under the otherwise excludable rule you could 'pretend' your plan has a 1 year wait for everything and base your testing (both coverage and ADP/ACP) with 2 groups (those with 1 year and those with less than 1 year)
the regs refer to 'max exclusion' but the IRS has yet (despite promises) to explain what that means. some officials insist you follow the plans entry dates (e.g. monthly)
other stand by 1/1 and 7/1 for a calendar year plan.
A strict reading of the code would be the first day of the plan year and 6 months after meeting the 1 year/age 21 wait (e.g. someone hired 3/1/10 would enter 9/1/11

sbjpa added a wrinkle that says the otherwise excludable rule can be modified slightly. if you have an HCE with less than 1 year pretend he actually had 1 year of service. Thus, you only have NHCEs in the otherwise excludable group and that always passes testing. Those rules apply to ADP/ACP testing only, the coverage rules remain the same! as far as I can tell, this could create what seems odd for the otherwise excludables group for coverage testing. only the hce gets a match. but no NHCEs are eligible yet so the plan passes coverage for the otherwise excludables!
Humbug, back for a month.
(yes, that is really me)

#3 justatester


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Posted 16 May 2011 - 02:36 PM

In paragraph 1, if I applied the 21/1/semi, would I test both deferrals and match even though the match is safe harbor.

In paragraph 2, does this still apply with QACA plans?

Also, if the requirment was 12 months of service it would be easier...however, the requirement is 1000 I have, for example, a participant who was hired in may 2010..complete 1000 hours by 10/1/10 and was then match where would he be tested? Also have participants who were hired many years ago and NEVER worked 1000 have never been match eligible.

Since the client tells us who is match eligible...does treating only those match eligible as part of the "safe harbor" plan and therefore not subject to ADP/ACP testing...and treating those not eligible as a separate plan and subject to ADP testing make sense?