Guest RMPension Posted June 9, 2008 Share Posted June 9, 2008 I am reviewing Corbel's newest DC Checklist and they have the option of assigning each participant into their own group. This seems to be the most flexible design for cross-tested plans. Are there any pittfalls to this option or should I go ahead and convert all my plans to this method? Also, it is my understanding that if a "Group" does not recieve any Employer contributions, they do not need to receive a gateway allocaiton. ( If they receive a 3% Top Heavy or a 3% Safe Harbor , they must receive the 5% gateway. If they recieve 0.00 they can stay at 0.00) Does it follow, that if you do not need an individual for the test, they can recieve nothing for the year and the plan still passes Gateway? Link to comment Share on other sites More sharing options...
rcline46 Posted June 9, 2008 Share Posted June 9, 2008 The short answer is yes. However, remember that you have a limited number of allocation rates in a prototype, and -0- is an allocation rate. ALso, remember that you do NOT have access to 401(a)(4)-11(g) amendments in a prototype. I don't think new comparabilily and prototypes mix well unless you are choosing to not do the best job for your client (my opinion). Link to comment Share on other sites More sharing options...
Mike Preston Posted June 9, 2008 Share Posted June 9, 2008 Was one of these messages edited in a way we can't tell? Reed, what makes you think this is a prototype? Link to comment Share on other sites More sharing options...
rcline46 Posted June 10, 2008 Share Posted June 10, 2008 Unless RMPension jumped and loaded the Corbel release over the weekend (it came out after 5PM Friday) the only checklist available was for the prototype. I don't know when the ASP checklists became available. SO, I jumped to the conclusion he/she was looking at the prototype. If not, I apologize to RMPension, but my comments on the prototype still stand. Link to comment Share on other sites More sharing options...
Guest RMPension Posted June 10, 2008 Share Posted June 10, 2008 Thanks for the comments and I am looking at the Volume Submitter checklist that came out last Friday. (My document guy works late:) Link to comment Share on other sites More sharing options...
Mike Preston Posted June 10, 2008 Share Posted June 10, 2008 In a Vol Sub plan, the answer is yes. That is, if an individual receives nothing then that individual does not need to receive the gateway. Bear in mind that the IRS takes the position that if you have ANYBODY in your plan that receives nothing who can, if you decided otherwise, receives something, then you have effectively named that person out of the plan for that year and your 410(b) tests must be done without being able to rely on the average benefits test. Usually, this isn't a problem. But if you are trying to exclude more than 30% of the NHCE's it could become one. Link to comment Share on other sites More sharing options...
Laura Harrington Posted June 13, 2008 Share Posted June 13, 2008 The short answer is yes. However, remember that you have a limited number of allocation rates in a prototype, and -0- is an allocation rate. ALso, remember that you do NOT have access to 401(a)(4)-11(g) amendments in a prototype.I don't think new comparabilily and prototypes mix well unless you are choosing to not do the best job for your client (my opinion). I'm interested in the comment that in a prototype you do not have access to 401(a)(4)-11(g) amendments. Can you provide references that support this? Thanks! Laura Link to comment Share on other sites More sharing options...
J Simmons Posted June 13, 2008 Share Posted June 13, 2008 I am interested too, because elsewhere I've heard a strategy is to use the prototype cross-tested, but if when testing for a year you need more NHCE groupings than allowed, do an -11g amendment. Until you might need to do so, you have the efficiencies of being prototype, and only once you need more NHCE groupings, through the -11g amendment, do you render the plan then to be 'individually designed'. John Simmons johnsimmonslaw@gmail.com Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation. Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted June 13, 2008 Share Posted June 13, 2008 What efficiency exists in a prototype now under EGTRRA (vs. a volume submitter)? Link to comment Share on other sites More sharing options...
rcline46 Posted June 16, 2008 Share Posted June 16, 2008 Because you cannot modify the language in a prototype document, the use of -11(g) instantly takes you out of prototype status and into an individually designed plan. You lose reliance on the prototype letter. Link to comment Share on other sites More sharing options...
Laura Harrington Posted June 17, 2008 Share Posted June 17, 2008 Because you cannot modify the language in a prototype document, the use of -11(g) instantly takes you out of prototype status and into an individually designed plan. You lose reliance on the prototype letter. This is assuming the -11(g) amendment is amending the pre-approved lanaguge and not just making changes to an election allowed in the adoption agreement. For example, the retroactive amendment could be made to add more employees to the allocation by changing the excluded groups of employees or to increase benefits in the case of a fixed formula. Those types of amendments would not necessarily knock the plan out of reliance on the prototype letter. Laura Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted June 17, 2008 Share Posted June 17, 2008 I see no advantage to using a prototype plan for EGTRRA restatements, when compared to a volume submitter EGTRRA document. The prototype appears to be more restrictive. Link to comment Share on other sites More sharing options...
Laura Harrington Posted June 17, 2008 Share Posted June 17, 2008 The one advantage that a prototype may have over a volume submitter is the ability for the prototype sponsor to amend the plan on behalf of the adopting employers due to law changes. Under the EGTRRA documents the volume submitter sponsor can amend the plan on behalf of the adopting employers if the plan document includes such language, but not all volume submitters contain this language. That is the only possible advantage I can see. Laura Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted June 17, 2008 Share Posted June 17, 2008 Under the EGTRRA documents the volume submitter sponsor can amend the plan on behalf of the adopting employers if the plan document includes such language, but not all volume submitters contain this language. I'm surprised not everyone added that language. Fair enough. If your document allows you to amend on your clients' behalf, then I'm suggesting vol sub for all of your EGTRRA restatements. Link to comment Share on other sites More sharing options...
Laura Harrington Posted June 17, 2008 Share Posted June 17, 2008 Under the EGTRRA documents the volume submitter sponsor can amend the plan on behalf of the adopting employers if the plan document includes such language, but not all volume submitters contain this language. I'm surprised not everyone added that language. Fair enough. If your document allows you to amend on your clients' behalf, then I'm suggesting vol sub for all of your EGTRRA restatements. I'm surprised too. I was actually just quoting something I heard an IRS rep say on a webcast. Laura Link to comment Share on other sites More sharing options...
ak2ary Posted June 17, 2008 Share Posted June 17, 2008 IAlso, it is my understanding that if a "Group" does not recieve any Employer contributions, they do not need to receive a gateway allocaiton. ( If they receive a 3% Top Heavy or a 3% Safe Harbor , they must receive the 5% gateway. If they recieve 0.00 they can stay at 0.00) Does it follow, that if you do not need an individual for the test, they can recieve nothing for the year and the plan still passes Gateway? You mean that you don't need them for the test because they generate low EBARs because of their superannuation? Be careful, if the sponsor elects to make zero for some classes of employees and chooses the zeroes to be the company's oldest employees...ya got trubble Link to comment Share on other sites More sharing options...
Mike Preston Posted June 18, 2008 Share Posted June 18, 2008 potential trubble Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted June 18, 2008 Share Posted June 18, 2008 but no trubble if they're an HCE Link to comment Share on other sites More sharing options...
Mike Preston Posted June 18, 2008 Share Posted June 18, 2008 See, that is a major issue. If Jamaica Boy's comment is to be construed strictly, it doesn't matter whether the folks being taken to zero are HCE's or NHCE's. As I understand it, the issue isn't a4, it is ADEA and that law doesn't give a free pass to HCE discrim, like a4 does. Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted June 18, 2008 Share Posted June 18, 2008 okay, I was only considering the a4, not something like ADEA. So, excluding the old owner is a problem, or using him as a zero. How about providing just a small amount to that old owner? Or will this only apply to non-owner HCEs? Link to comment Share on other sites More sharing options...
J Simmons Posted June 18, 2008 Share Posted June 18, 2008 For ADEA purposes, size matters. It's not like minimum coverage. It would be more difficult for an older owner to complain than an older non-owner--after all, the older owner may have been involved in making the decision that discriminates in favor of younger employees. John Simmons johnsimmonslaw@gmail.com Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation. Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted June 18, 2008 Share Posted June 18, 2008 Does this mean if the IRS reviews a case where an HCE (age 60 to 65, owner or not) gets 1% of pay allocation, and the other owner (age 50 - 55) gets 13.26% of pay allocation, and the nonhighly group gets 5% each, and it passes 401(a)(4) that IRS could refer the above case to some other gov agency regarding an ADEA violation? Link to comment Share on other sites More sharing options...
J Simmons Posted June 18, 2008 Share Posted June 18, 2008 I've never heard of the IRS referring a case for possible ADEA violation to the EEOC. More likely a disgruntled older employee refers to EEOC. John Simmons johnsimmonslaw@gmail.com Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation. Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted June 18, 2008 Share Posted June 18, 2008 okay, so then we are back to merely "potential trubble" Link to comment Share on other sites More sharing options...
ak2ary Posted June 19, 2008 Share Posted June 19, 2008 I think its more potential trubble. The answer I gave above was strictly in response to "Does it follow, that if you do not need an individual for the test, they can recieve nothing for the year and the plan still passes Gateway?" By definition HCEs don't need the gateway and you do need HCEs for the test. I agree with Mike, ADEA cares about age discrimination and protects HCEs and NHCEs alike. If you have a plan as described above though, where you have a typical plan that, even tho everyone is in a separate category, gives a flat % of pay for staff or the greater of a flat dollar or flat % and you do the etest and you find that you have a group of nhces that are in nobody's rate group, so you change their contribution to zero. You will find that you have excluded the oldest of your employees exclusively and in this case you have likely trubble. If you actually give different contributions to different peeps such that the group you wind up excluding is not exclusively older you may only have potential trubble or no trubble If you only exclude HCEs you can make an arguement that it wasnt based on age ... but my undertanding is that adea looks at actual impact rather than intention and if the older HCE brings suit you got potential trubble..but the irs likely has no problem Link to comment Share on other sites More sharing options...
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