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One to One correction


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8 replies to this topic

#1 austin3515

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Posted 02 August 2012 - 01:25 PM

For an ADP Test where the refunds were not done before year-end.

Is there any way at all to limit the list of people entitled to an allocation of this ridiculously small QNEC? I know we can exclude people who terminated through the date of correction, but is it possible to exclude people with no balances. If I cannot, we're talking about less than $10 for most people.
Austin Powers, CPA, QPA, ERPA

#2 four01kman

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Posted 02 August 2012 - 03:20 PM

I seem to remember a correction method allowing the QNEC to go to 1 or more NHCEs, instead of all. Since I haven't had a correction for a client in a number of years, I suspect the government probably doesn't allow it anymore.
Jim Geld

#3 DMcGovern

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Posted 02 August 2012 - 04:05 PM

Just a thought - I have not used the Corbel doc in a while, but I seem to remember that the Plan & Trust document had some language in it that would exclude NHCEs with less than 500 hours from QNEC allocations (depending on which type you are using)
"I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." --Robert McCloskey

#4 ETA Consulting LLC

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Posted 02 August 2012 - 04:23 PM

For an ADP Test where the refunds were not done before year-end.

Is there any way at all to limit the list of people entitled to an allocation of this ridiculously small QNEC? I know we can exclude people who terminated through the date of correction, but is it possible to exclude people with no balances. If I cannot, we're talking about less than $10 for most people.


Under SCP, you are limited to all NHCEs (with only those prescribed exclusions). Your only alternative is to submit through VCP to ask the IRS for a smaller group (i.e. calculate the one to one QNEC as a one to one QMAC in order to prevent from opening many accounts with small balances.

SCP doesn't provide that much flexibilty in limiting the population of employees receiving the one to one correction.

Good Luck!
CPC, QPA, QKA, TGPC, ERPA

#5 Tom Poje

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Posted 03 August 2012 - 06:42 AM

and as I recall, you can't even use the otherwise excludable option.

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


#6 ETA Consulting LLC

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Posted 03 August 2012 - 07:24 AM

and as I recall, you can't even use the otherwise excludable option.


True. It's very, very limited. You can easily request it under VCP, but SCP doesn't provide much flexibility.
CPC, QPA, QKA, TGPC, ERPA

#7 BG5150

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Posted 03 August 2012 - 07:33 AM

FWIW, you don't have to do a 1-to-1 QNEC after distributions.

You can do a straight QNEC in an amount enough to pass the test and not have to do refunds. (Appendix A)

In my experience, these are usually more costly, but you do get around the sometimes-thorny issues of sending checks to the HCEs.

QKA, QPA, CPC, ERPA

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


#8 austin3515

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Posted 03 August 2012 - 07:38 AM

Tom, so true, and so foolish. I'm lucky though because in my case the eligiblity is 1 YOS already...
Austin Powers, CPA, QPA, ERPA

#9 fiona1

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Posted 06 August 2012 - 01:02 PM

I asked this very question at the 8/24/2010 IRS EPCRS phone forum. Rev Proc 2008-50 allows you to fund the 1:1 QNEC to those NHCE's who are still active, but that could still lead to very small QNEC amounts.

You can find the transcript online - but here was the response:

When using the one-to-one correction method can you have situations where the methodology results in the employee's getting de minimis amounts and so really practically you might want to come up with a somewhat different approach to allocate the QNC that's used to correct the ADP test using the one-to-one correction method? The answer is probably you could. You may want to consider the exceptions to full correction provided in Section 6.02 of the revenue procedure, and that includes a provision relating to the delivery of small benefits. That provision might support the rationale you might use in coming up with an approach that the revenue procedure might otherwise consider to be less than full correction.