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You're benefiting 100% of the Nonexcludable HCE's. In order to pass the compensation ratio test you only need to benefit 70% of the nonexcludable NHCE's (11 in this case).

You are already benefiting 9 of the 11 needed to pass the compensation ratio test and not worry about crosstesting or average benefits testing. Likely those additional two employees would normally receive the 3% TH minimum; but this will not be a TH miniumum once you amend to bring them into the allocation formula for the plan. Another 5%, for a base allocation of 8% for the two brought into the plan would get you were you need to be. Others who are not brought into the plan will be left at the TH minimum of 3%. THIS IS IN RESPONSE TO WSP'S ADDITIONAL QUESTION.

Dang, should have added the question about why it's an amendment to bring someone above the TH minimum if the document says "at least"....I recognize that it's an amendment to bring one of the TH group to a higher level, but if I'm bringing the entire group up??? Say that only because based on hire dates it's actually cheaper for me to bring the entire TH group up to 5% than it is for those 2 members up to 8%.

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But, IF, IF, IF (let me emphasize again, IF) I mistakenly assumed you called me stupid in a prior post, surely you don't expect to me believe your last post doesn't?

Look at it this way. Who amongst us would want to be held in high esteem by the Nut? His ideas are truly bizarre. He believes that regulations and Code are indecipherable. Do you? Of course not. He believes that regulations and Code should be ignored in favor of some ethereal principles that only he knows. Do you? Of course not. He sees language that is crystal clear and interprets it in a bizarre manner. Do you? Of course not.

I have been called inexperienced and incapable by him.

Austin, welcome to the club. I am happy to line up in your camp.

More rhetoric. Please. It is always the weakest among us to challenge the teacher; but not the message. I am actually beginning to feel sorry for you; and I don't even know you.

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You're benefiting 100% of the Nonexcludable HCE's. In order to pass the compensation ratio test you only need to benefit 70% of the nonexcludable NHCE's (11 in this case).

You are already benefiting 9 of the 11 needed to pass the compensation ratio test and not worry about crosstesting or average benefits testing. Likely those additional two employees would normally receive the 3% TH minimum; but this will not be a TH miniumum once you amend to bring them into the allocation formula for the plan. Another 5%, for a base allocation of 8% for the two brought into the plan would get you were you need to be. Others who are not brought into the plan will be left at the TH minimum of 3%. THIS IS IN RESPONSE TO WSP'S ADDITIONAL QUESTION.

Dang, should have added the question about why it's an amendment to bring someone above the TH minimum if the document says "at least"....I recognize that it's an amendment to bring one of the TH group to a higher level, but if I'm bringing the entire group up??? Say that only because based on hire dates it's actually cheaper for me to bring the entire TH group up to 5% than it is for those 2 members up to 8%.

We'll you will likely be able to make such amendment, but there are other things to consider. If you are on a prototype plan, you may amend to change the accrual requirements with respect to the year without taking the document out of prototype status. Not sure, but think this would be safe. When you amend to provide an allocation that is not automatically supported by the non-standardized prototype, you may no longer rely on the Prototype's Opinion Letter and shoud consider filing the amendment for a favorable determination letter. Based on the dollar amounts involved and the future projections, you would consider the path of the least resistance. If you were to attempt to design the amendment based on the individual with the lowest compensation (I personally do not think that would fly). Using the hire date (given the fact that the employees are already eligible for the plan but merely failed to meet the accrual requirements) may not fly.

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[Even though they were employed on the last day, they each worked less than 1000 hours during the year. I doubt they would all have the same number of hours. So your amendment would simply bring in the employees starting with the one having the highest nubmer of hours during the year. Try that one for starters.

Gotcha...makes sense in that regard. Ok this is really a fundamental question then. I thought I knew this but a number of different posts have said similar things. If my service requirement for the deferral is 3 months but service requirement for p/s is 1 year then isn't it possible that I have members of my TH group with over 1000 hours? In that regard it's very possible that I have 3 employees with 2080 hours (I don't so your amendment works, but just trying to get an understanding here.). I was under the impression that anyone who was a participant in the plan but wasn't eligible for a reason other than termination received that...essentially excluding only those with less than 3 months of service.

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I am beginning to understand.

Q1 If there are 2 hces of different ages then would you need to have 3 NHCEs more than 17 years younger than each HCE e.g., 42 yo HCE requires 3 ee 25 or less and 50 yo HCE requires 3 more nhces age 33 or less or can you double count some or all nhces for both HCEs?

Q 2 if new comp plan is only plan, does the 5%/21% formula pass ave. bene test?

Q3 if the total of all ee is 10 or less and there are 2 HCEs would this formula ever pass xtesting?

Q1 In the context of my use of the "magic number" one may not double count. However, rounding is predicated on the total. So, pretend that the magic number is 2.5. Now let's superimpose your 42 and 50 yo HCE's. You would need three 25 yo or younger to support your 42 year old. But once you have those 3, you would only need two more 33 yo or younger to support your 50 yo. As previously indicated, after imputing permitted disparity the 25 is probably 26 and the 33 is probably 34.

Q2 Sure. With flying colors. To pass 401(a)(4) we are saying that, on a cross tested basis, the 5% going to the NHCE is equal to or greater than the 20% going to the HCE. Pretend that you have precisely the "magic number" required of NHCE's that are precisely 17 (or 16 if one imputes permitted disparity) years younger than their corresponding HCE's. You would then have a whole bunch of NHCE's and a whole bunch of HCE's getting precisely the same benefit. In other words the ratio of average NHCE benefit to average HCE benefit would be 100%. One only needs 70% to satisfy the average benefits test. So the example you posit presumes that the average benefits test is satisfied with a margin of 100/70, or 142+%.

What happens in real life, as you have seen from the OP's question, is that there are frequently participants who, for one reason or another, don't benefit, yet count for 410(b) purposes. Including these people in the overall average (which you must do), serves to lower the 142+%.

And I know you said you are mathematically challenged, but there is a symmetry here that is, mathematically speaking, quite sparkling. Once you understand it, it sends tingles up your spine. At least it does for those that are mathematically inclined. Note that if you reduce the body count in the underlying 5/20 design such that you have eliminated the maximum NHCE's allowed without failing the 70% threshold you will then end up diluting your 142% back precisely to 100%. It is like that Travelocity commercial ("ooooh...tingly").

Q3. Body count doesn't matter, as things scale automatically. In the case that you posit here, there are 10 EE's, 8 of which are NHCE, 2 of which are HCE. The concentration percentage is 80%, leading to a midpoint of 30%. 30% times 8 = 2.4 / 2 = 1.2 as your magic number. Hence, if you provide for an allocation such that the average benefits test is satisfied, you will need 1.2 NHCE's in the higher of the two HCE's rate group (that means 2) and 2.4 NHCE's in the lower of the HCE's rate group (that means 3). If the average benefits test is not satisfied, you will need 70% times 8 = 5.6 / 2 = 2.8 as your magic number. In that case, you will need 2.8 NHCE's in the higher of the two HCE's rate group (that means 3) and 5.6 NHCE's in the lower of the two HCE's rate group (that means 6).

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Q3. Body count doesn't matter, as things scale automatically. In the case that you posit here, there are 10 EE's, 8 of which are NHCE, 2 of which are HCE. The concentration percentage is 80%, leading to a midpoint of 30%. 30% times 8 = 2.4 / 2 = 1.2 as your magic number. Hence, if you provide for an allocation such that the average benefits test is satisfied, you will need 1.2 NHCE's in the higher of the two HCE's rate group (that means 2) and 2.4 NHCE's in the lower of the HCE's rate group (that means 3). If the average benefits test is not satisfied, you will need 70% times 8 = 5.6 / 2 = 2.8 as your magic number. In that case, you will need 2.8 NHCE's in the higher of the two HCE's rate group (that means 3) and 5.6 NHCE's in the lower of the two HCE's rate group (that means 6).

Which brings us to the real world application where the business owner hires the beautiful young gals (legal age of course) to be his receptionist and payroll clerks and then tells his spouse that he has to otherwise they wouldn't be able to maximize their retirement plans. I'm sure it's not the intent of the IRS to do that...but who am I to argue with the results.

But I digress....Mike, what you are saying is that as you get smaller and smaller doesn't it become necessary to become flexible with entrance requirements to ensure 410(b) passage, correct? flexible as in immediate eligibility?

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We'll you will likely be able to make such amendment, but there are other things to consider. If you are on a prototype plan, you may amend to change the accrual requirements with respect to the year without taking the document out of prototype status. Not sure, but think this would be safe. When you amend to provide an allocation that is not automatically supported by the non-standardized prototype, you may no longer rely on the Prototype's Opinion Letter and shoud consider filing the amendment for a favorable determination letter. Based on the dollar amounts involved and the future projections, you would consider the path of the least resistance. If you were to attempt to design the amendment based on the individual with the lowest compensation (I personally do not think that would fly). Using the hire date (given the fact that the employees are already eligible for the plan but merely failed to meet the accrual requirements) may not fly.

I'm not sure I followed this one. Plan is a basic Corbel Volume Submitter plan. Neither hours or hire date would fly? Why not hire date? I could see having problems making this a one off amendment basing it on letting someone in early, but not if it was left for all employees. In this specific case I'd only be changing entry date to quarterly instead of semi-annual. Or was that not what everyone was suggesting.

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We'll you will likely be able to make such amendment, but there are other things to consider. If you are on a prototype plan, you may amend to change the accrual requirements with respect to the year without taking the document out of prototype status. Not sure, but think this would be safe. When you amend to provide an allocation that is not automatically supported by the non-standardized prototype, you may no longer rely on the Prototype's Opinion Letter and shoud consider filing the amendment for a favorable determination letter. Based on the dollar amounts involved and the future projections, you would consider the path of the least resistance. If you were to attempt to design the amendment based on the individual with the lowest compensation (I personally do not think that would fly). Using the hire date (given the fact that the employees are already eligible for the plan but merely failed to meet the accrual requirements) may not fly.

I'm not sure I followed this one. Plan is a basic Corbel Volume Submitter plan. Neither hours or hire date would fly? Why not hire date? I could see having problems making this a one off amendment basing it on letting someone in early, but not if it was left for all employees. In this specific case I'd only be changing entry date to quarterly instead of semi-annual. Or was that not what everyone was suggesting.

Based on your previous post regarding the 3 month entry, these early entrants aren't considered includable in your coverage ratio test for the profit sharing plan. Why would you want to amend to increase the employees who are statutorily excludable from the test due to not having a full year of service for plan eligibility? So, to actually amend to provide entry and subject they early entrants to being the the denominator when they are currently excludable would seem to overdo it. Are you properly excluding these individuals with less than 1 year of service from the coverage ratio test?

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Based on your previous post regarding the 3 month entry, these early entrants aren't considered includable in your coverage ratio test for the profit sharing plan. Why would you want to amend to increase the employees who are statutorily excludable from the test due to not having a full year of service for plan eligibility? So, to actually amend to provide entry and subject they early entrants to being the the denominator when they are currently excludable would seem to overdo it. Are you properly excluding these individuals with less than 1 year of service from the coverage ratio test?

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Yes, they are excluded from initial coverage testing. But, they do receive the top heavy and thus get INCLUDED when I move to the average benefits test after failing that initial percentage test, correct? At least I thought they did. And using that assumption, that's why I'm reluctant to amend and am clinging to the last fiber of hope that I could increase top heavy and avoid actually amending to include any otherwise excludables. Especially given that the top heavy increase would be smaller in terms of actual dollars.

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Q3. Body count doesn't matter, as things scale automatically. In the case that you posit here, there are 10 EE's, 8 of which are NHCE, 2 of which are HCE. The concentration percentage is 80%, leading to a midpoint of 30%. 30% times 8 = 2.4 / 2 = 1.2 as your magic number. Hence, if you provide for an allocation such that the average benefits test is satisfied, you will need 1.2 NHCE's in the higher of the two HCE's rate group (that means 2) and 2.4 NHCE's in the lower of the HCE's rate group (that means 3). If the average benefits test is not satisfied, you will need 70% times 8 = 5.6 / 2 = 2.8 as your magic number. In that case, you will need 2.8 NHCE's in the higher of the two HCE's rate group (that means 3) and 5.6 NHCE's in the lower of the two HCE's rate group (that means 6).

Which brings us to the real world application where the business owner hires the beautiful young gals (legal age of course) to be his receptionist and payroll clerks and then tells his spouse that he has to otherwise they wouldn't be able to maximize their retirement plans. I'm sure it's not the intent of the IRS to do that...but who am I to argue with the results.

But I digress....Mike, what you are saying is that as you get smaller and smaller doesn't it become necessary to become flexible with entrance requirements to ensure 410(b) passage, correct? flexible as in immediate eligibility?

Actually, there is a real world case where somebody, somewhere put themselves in the business of arranging for the temporary hire of high school age individuals for the sole purpose of satisfying the tests. This is, even in my opinion, abusive and is what the previously mentioned (by me) Gold Memo targets. However, in your case, if the receptionist is a legit employee, the husband is making a strong case, in my opinion. Great example.

I'm not sure I agree with the rationale, but I agree with the conclusion. Certainly, since this is a demographically influenced test, as the numbers get smaller one has increasing variance. If just one participant is different from the prior year, the testing results can be dramatically different. So, yes, if the employer is willing to entertain the notion that it may be to the employer's advantage to relax the statutory entrance requirements in a given year solely for the purpose of satisfying the tests, I think that flies. The only restraint being that one can not make an amendment which is discriminatory. For example, you can't amend the plan to relax the eligibility requirements in the year that an individual buys into the practice (so that they are an HCE) and bring that person into the plan at a low rate to help your test. The way I understand the IRS' interpretation of a discriminatory amendment, it is always viewed on its own (and now I'm talking about a regular amendment, not an amendment made after the end of the year - those are called 401(a)(4)-11g amendments and they have a separate threshold to satisfy). Hence, bringing in additional NHCE's to pass your test will never be considered discriminatory. Of course, the Nut will argue with this, but that is his problem. I will agree with most of what he has said so far, though, because he has not touched on the real issue we were discussing, and other than that issue, his comments are relatively accurate. I'll respond to the ones I find questionable in another post.

I'll hit a number of your individual questions here, though.

Your insight into the ramifications of juggling benefits for the sake of satisfying the tests is crystallizing, based on your questions. This is a good thing.

I'm still a little unclear on the plan's design and without clarity, conclusions are always suspect. I know that you have a 3 month eligibility for deferrals, but I'm not sure whether the eligibility for a PS contribution continues to be the statutory 21/1 or whether a participant who entered the plan in the year in question would be eligible for a profit sharing contribution if they had 1000 hours. I'm guessing that it is the former, not the latter (however, it rarely works that way in practice, because of entry dates - take the full time person hired 12/1/2004 and a 12/31/2005 plan year end - even if the document calls for 21/1 most still make this person eligible for the ps, even though if the statutory provisions were applied, entry wouldn't take place until 2006).

For now, let's assume that there is nobody that upsets the apple cart like my hypothetical 12/1/2004 hiree.

So, getting back to your insights, you are correct that your hypothetical 2080 hour employee hired in the first month of the year would indeed be eligible for the TH minimum because they were active participants in a TH plan on the last day of the year.

The NUT wants you to bring in employees who are the most expensive first, in some vain attempt to satisfy his own ethereal definition of what is discriminatory. While that will most assuredly work (no way will the IRS object), unless you are bringing in people who are short service (see the Gold Memo previously referenced), you really have nothing to fear. Bring in those that are the least costly and you should be fine.

If that doesn't sit well with you or the plan sponsor and the cost to put on a belt and a pair of suspenders is low, I certainly wouldn't argue against something more generous.

As to your ability to "discriminate in that regard", you are free to design what you want. The requirements depend on whether the amendment is in advance of the plan's year end or in arrears. If it is in advance, it merely must not be a discriminatory amendment. If it is in arrears, it must not only be non-discriminatory, it must meet the requirements of -11g (which basically means that it must pass 401(a)(4) on its own). If you have any doubts about the propriety of such an amendment, submit it to the IRS for approval.

This is where it is a judgement call. In your case, you have so few participants required to receive an additional allocation that it may not make sense to do anything other than what the NUT has suggested: be conservative, add more money to NHCE accounts than you might otherwise be required to do and sleep well knowing that the plan sponsor has saved money by not having to go through the effort of submitting.

I agree with the NUT that pushing two participants from TH minimum only to full bore participation in the employer's contribution is one way to skin this particular proverbial cat.

But I resubmit that I am not convinced that your plan fails 410(b). If it passed 410(b), then it is a safe harbor design and you don't have any correction to make.

To complete the analysis, just make a list of the 16 non-excludables who are benefitting under the regular profit sharing allocation and list their:

1) Year of birth

2) Compensation

3) Allocation (including forfeitures, if any)

4) Deferrals

Do the same thing for the the others who are in the plan at any point in time during the year (whether or not terminated), but add the following information:

5) Hours worked during the year

I think your case is a great case study and I'll be happy to run the real test for you. I may be wrong, but my gut is telling me that you will pass without need of further contributions. Famous last words, right?

Note that even with the above information I can not run all of the tests that I would normally run. To do that I would need 12/31/2005 account balances and compensation and allocation history for 2004 and 2003. That would allow me to also run the accrued to date test. I'll leave that one on the sidelines, if you don't mind.

Don't be concerned about the flap here on BenefitsLink. It is certainly not your fault. The NUT is looking to me to be more and more dangerous, because much of what he writes is indeed correct. That lends credibility to his silly concepts of ignoring the regs and code in favor of some imprecise standard that only he can determine. I consider that extremely dangerous and will rail against it at every opportunity (as I'm doing now).

If you want to send me the information in a private message rather than post that information on here, I can understand that. If you don't want to send out that data, even though it is unattributed (without participant identifying information) I can understand that, too. Whatever you decide is fine with me.

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Mike,

I'd be glad to send data. If there's anything that I've learned over the years is that there are always others that know more than me so I strive to learn from them. This, obviously, is one of them. I'm comfortable with that as I can always teach that same person something about a different topic.

You'll have to wait though as I'm getting ready to call it a day. Short one, I know...but soccer practice waits for no man and I choose to disappoint others before I'll disappoint my son.

As I said earlier, I'll be thrilled if this passes. And to the degree that you point out my errors to make it so? I'll be glad to hear that too. It's all about the client and not me. I want this to pass muster with as little $$ as possible. They tend to like that...

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Based on your previous post regarding the 3 month entry, these early entrants aren't considered includable in your coverage ratio test for the profit sharing plan. Why would you want to amend to increase the employees who are statutorily excludable from the test due to not having a full year of service for plan eligibility? So, to actually amend to provide entry and subject they early entrants to being the the denominator when they are currently excludable would seem to overdo it. Are you properly excluding these individuals with less than 1 year of service from the coverage ratio test?

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Yes, they are excluded from initial coverage testing. But, they do receive the top heavy and thus get INCLUDED when I move to the average benefits test after failing that initial percentage test, correct? At least I thought they did. And using that assumption, that's why I'm reluctant to amend and am clinging to the last fiber of hope that I could increase top heavy and avoid actually amending to include any otherwise excludables. Especially given that the top heavy increase would be smaller in terms of actual dollars.

The average benefits test needs to parallel your 401(a)(4) testing methodology when dealing with entry date provisions. This means that there are, indeed, two average benefits tests in the rare circumstance that you are permissively disaggregating the statutorily includables from the statutorily excludables. This has been discussed at length on BenefitsLink before, and given that it is well settled, I'm confident that the NUT will find some reason to say that everybody here is wrong on that score, too.

In the vast majority of cases, it is in your best interest to run a single average benefits test, though. This is because you end up with those 3 late 70's birth dates in your test, which when applied on a crosstested basis, the test almost invariably passes.

But that brings us full circle to whether doing such causes the gateway requirement to kick in for you.

I couldn't quite understand all of the numbers you posted, so I'll elaborate here, if you don't mind. You say that there are 22 non-excludables, 16 of which are receiving an allocation, and 6 of which are terminated with more than 500 hours. You also say there are 7 people in the TH group and 4 in the not eligible group not otherwise included in the 6 who are terminated with more than 500 hours.

That means you have 22 plus 11, which is 33, but you say you have 36 total employees. Can you tell me what I've missed?

And while I'm at it, and I know this is going to sound sort of condescending, but there really isn't any way to mention this without doing so, you say that the Average Benefits is 4.12/6.73, for a percentage of 61.2%. This *was* run by including the deferrals, right? If not, please rerun it with deferrals and let me know what it looks like. Sorry, but I had to ask.

Oh, one more thing. Your plan seems to have wording that appears to allow for a th minimum in excess of 3%. I think you will find if you look into it, that the language you are looking at is intended to cover a circumstance that you aren't in. For example, if the plan were part of a DB/DC combo you might find that 5% is the top heavy minimum. I don't think you can, arbitrarily, increase the th minimum to something higher than what it really is. So if you only have one plan, 3% is the max.

Now, can you amend your volume submitter to define the TH minimum as 4% notwithstanding the fact that this will be an amendment which is outside the approved volume submitter thresholds? Sure. And if the IRS considers it a non-substantive change, you can even keep your volume submitter status. However, you would lose your reliance on safe-harbor because I don't think the safe-harbor exception extends to "just any old formula". I think it only extends to the TH requirement. I might be wrong on this, though, so somebody should look that up. Losing your safe-harbor isn't the worst thing in the world, though, because as we have seen, your plan will satisfy 401(a)(4) easily once you satisfy 410(b).

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Mike Preston, you know all your rhetoric and pages of writing is attempting to explain something that isn't really complicated at all. Why even go with DB/DC combo suggestions when the issue is only one plan. Also, you should never attempt to imagine what I might in an attempt to give yourself some false credibility.

I am sure by now you have contacted one of your local professionals and becamed enlightened to the fact that the mere application of an average benefits tested does not preclude you from having the meet the gateway requirements when cross-testing. Yet, you take that lame position with all the other inexperienced individuals and use my position to attack my character. Futher, you will now begin to reference my login name during your longwinded answers. You're weaker than I thought. But for yourself, and the rest of the viewers, please explain what your local experted educated you on the issues of gateway applicability.

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Mike Preston, you know all your rhetoric and pages of writing is attempting to explain something that isn't really complicated at all. Why even go with DB/DC combo suggestions when the issue is only one plan. Also, you should never attempt to imagine what I might in an attempt to give yourself some false credibility.

I am sure by now you have contacted one of your local professionals and becamed enlightened to the fact that the mere application of an average benefits tested does not preclude you from having the meet the gateway requirements when cross-testing. Yet, you take that lame position with all the other inexperienced individuals and use my position to attack my character. Futher, you will now begin to reference my login name during your longwinded answers. You're weaker than I thought. But for yourself, and the rest of the viewers, please explain what your local experted educated you on the issues of gateway applicability.

Where did I mention DB/DC combo? Thanks for the chuckle.

I suggest you contact the IRS in Washington to determine whether your interpretation is correct. Either that, or Mr. Tripodi directly.

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Guest Pensions in Paradise

ERISAnut - I'm going to ask the question that I'm sure a lot of readers are wondering. Would you mind telling us your experience, education, professional designations, etc. I'm really curious because you are quick to belittle others.

And in fairness, I have a BA, 16 years in pensions, and QKA/QPA designations from ASPPA. So I'm probably just a novice in your eyes.

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Just found this thread. I will second WSP's WOW. Mike needs to practice more, gain experience, and stop bringing his own regs to the playground, is that about it Nut? :D

There is 0% validity to Nut's arguments, in case anybody has doubts.

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Mike,

I'd be glad to send data. If there's anything that I've learned over the years is that there are always others that know more than me so I strive to learn from them. This, obviously, is one of them. I'm comfortable with that as I can always teach that same person something about a different topic.

You'll have to wait though as I'm getting ready to call it a day. Short one, I know...but soccer practice waits for no man and I choose to disappoint others before I'll disappoint my son.

As I said earlier, I'll be thrilled if this passes. And to the degree that you point out my errors to make it so? I'll be glad to hear that too. It's all about the client and not me. I want this to pass muster with as little $$ as possible. They tend to like that...

As I suspected, it looks like the plan passes. You even have a choice as to which method to use.

First, you can use a non-controversial method, if compensation of those eligible purely for the TH contribution is pro-rata for the year. Re-run your average benefits test on a contributions basis. Change the testing compensation to "compensation while a participant". Make sure your system has that information. In this case, assuming somebody was hired on or about 7/1/2005, they would be a participant for 3 months, but they would receive a TH allocation of 3% of entire year compensation, which results in the Average Benefits Test treating this person as if they were getting a 6% of pay contribution. Then, when you impute permitted disparity, they get an additional 5.7% on top of that. I am editing this message to highlight the fact that you need to determine actual compensation for the period of time that the individuals were participants in the plan, and that using a pro-ration (as I did) is not appropriate in a "real" test.

If my numbers are correct based on what you sent me, you should find that the average benfeits test is something like 9.74%/12.72% = 76.57%. Therefore you pass the average benefits test and you therefore pass 410(b) with only 9 out of 16 NHCE's "benefitting" in the profit sharing portion of the plan.

Second, you can use the method that I think works, but that the Nut says doesn't. That is, you test on the basis of benefits in your average benefits test (you can even not use "comp while a participant" if you want) and it will pass. My numbers are 4.34%/5.77% = 75.2% using full year compensation and 5.22%/5.77% = > 90% using comp while a participant.

Are we having fun, yet?

If you run the average benefits test on the basis that I have specified and still don't pass, send me your report output and I'll try to identify where your results are different from mine.

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I also suspect that there is a third way you can pass the average benefits test. If you run the test by excluding all people who are otherwise excludable, I think you will also pass. I didn't run it this way because there was a non-controversial (famous last words?) method available to you.

But just as an exercise, you might consider breaking your population into two groups, one of which is statutorily excludable and the other isn't. Then run the average benefits test on those that are not statutorily excludable and see if it passes. As I said, I *think* it will.

There are a number of people who have heard the mantra that there is always one and only one average benefits test and that you, perforce, include all benefits in that test. While this is usually the case, there is a somewhat complicated analysis that has been published on BenefitsLink before that makes it clear (to me, anyway) that when you are testing compliance with 410(b) by permissively disaggregating the statutorily excludables from the non-excludables, you also end up performing two ABT's in that circumstance.

Note that we didn't even begin to get into issues such as using the accrued to date method!!!!!

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Don't have the right data from the client, will have to get it. In the meantime I've plugged in a pro-rata comp figure and can see what you're talking about. Don't like it...not an apples to apples comparison. But at same time, we can exclude people who don't meet the statutorial minimums so why would this be any different....

Tried the two group method once along the way and it didn't pass...of course I've run this thing about 300 times so who knows what I was doing when it failed. But, I think by essentially pulling out that TH group I'm shooting myself in the foot (based upon their ages and comp).

Thanks!

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But, I think by essentially pulling out that TH group I'm shooting myself in the foot (based upon their ages and comp).

Especially if you use compensation while a participant as your testing compensation! Note that I'm not crosstesting so the age means nothing.

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I just read this for the first time. Wow!!!

I liken Erisanut to a 36 handicap golfer who is slicing, chunking and topping the ball all over the course. His playing partner is Mike Preston, who has just come off winning the Masters. After eagling the first hole, Erisanut tells Mike he needs to grip the club with his teeth to play better. Erisa has no reasoning for his advice, because no accomplished player does that, but Erisa is unfazed and insists on "learning" Mike how to play correctly. No amount of evidence, like Mike's pristine shotmaking, will deter Erisa.

Lol funny this thread is.

(Oops, I spelled Mike's name wrong.)

"What's in the big salad?"

"Big lettuce, big carrots, tomatoes like volleyballs."

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