austin3515

One to One correction

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austin3515    210

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.

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four01kman    4

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.

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DMcGovern    7

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)

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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!

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BG5150    320

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.

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fiona1    1

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.

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