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ADP testing off calendar


pmacduff
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I have a plan year that runs from 12/01/2011 through 11/30/2012.

A participant contributed his catchup of $5500 in December 2011.

In 2012 from Jan - Nov 30th he has contributed $18,860.48 making his total for the plan year $24,360.48. He will not exceed $22,500 in either calendar year (2011 or 2012).

When I run the ADP test in Relius it is testing $17,000 for him and shows $5,500 as catchup. What is happening with the other $1,860.48?

He is a NHCE so I'm not concerned about a failing test. I want to be sure that this is working properly. It's been so long since I had this scenario, my mind is befuddled!

Thanks in advance!

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I have a plan year that runs from 12/01/2011 through 11/30/2012.

A participant contributed his catchup of $5500 in December 2011.

In 2012 from Jan - Nov 30th he has contributed $18,860.48 making his total for the plan year $24,360.48. He will not exceed $22,500 in either calendar year (2011 or 2012).

So, you're saying he contributed exactly $5,500 during December 2011 and this amount was in excess of the 402(g) limit? Catch-up timing in off-calendar years can be very simple, but gets complicated very fast. How much did he actually contribute during December 2011; and how much did he actually contribute during the entire 2011 calendar year.

When I run the ADP test in Relius it is testing $17,000 for him and shows $5,500 as catchup. What is happening with the other $1,860.48?

Let's suppose that only $3,639.52 was contributed during December 2011 and that amount was in excess of the annual deferral limit. Then, on top of that, the participant contributed the $18,860.48 during the first 11 months of 2012. In this case, the catchup for the "plan year" would be $5,500 ($3639.52 for 2011 portion and $1860.48 for the 2012 portion. This would mean that Relius is correct.

But, this scenario provides a little insight into the additional questions that need to be answered in order for a proper analysis to be done.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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He did contribute exactly $5,500 in December of 2011. He was hired by my client 08/01/2011 (eligibility is 3 mos of svc and enter on 1st of the month following) and had contributed $16,500 at his prev. Employer.

For the calendar year 2011 he wanted to maximize and therefore did the $5,500 "catchup" under my client's plan when he became eligible.

I did find an example in Sal's book but right now it is too late in the day for me to read/comprehend properly, so I'm going to go over that tomorrow.

Again - I just want to be sure that Relius is performing the ADP testing properly with regard to this person; using only the $17,000 and indicating $5,500 in catchup. I believe that it is esp. since this participant is a NHCE and not HCE employee.

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Understood, but in order to do that you must ascertain that it is in-fact incorrect. You would need to outline all facts and compare this to how "you believe" any system's programming logic should handle it.

With that said, there is an argument that the entire $22,500 could be included in the ADP test. Remember the difference between 402(g) and 401(a)(30). 401(a)(30) references "plans of the employer" with respect to plan limits. Since $16,500 was deferred with an unrelated employer "AND" the employee did not exceed his "402(g) limit" during 2011, then you can easily see where , under the plan, there are no catchup amounts for this participant (since no plan limit was exceeded). 401(a)(30) does not require you to look at the deferral amounts for unrelated employers. And, to the extent 402(g) was exceeded across two unrelated employers, the plan isn't required to offer you an opportunity to correct with a distribution of the excess; it is merely an option.

So, arguably, the $5,500 deferred in 2011 plus $17,000 of the $18,860.48 would be includable in the ADP test. Relius "may" be attempting to calculate this until the $5,500 in catchup for 2011 was hardcoded. My analysis would be that only $1,860.48 would be catchup for the plan year and $22,500 would be included in the ADP test.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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How many payrolls are entered for this participant? You need at least two. One in December 2011 for his December comp and deferrals, and one sometime in 2012 with the Jan-Nov comp & deferrals. I'd probably use 11/30. This way the proper deferrals get booked for the proper year.

And, year over year, you'll be able to match W2 #'s to Relius as a double check.

QKA, QPA, CPC, ERPA

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

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thank you for all of the replies. I may not have comunicated my question properly. I'm not concerned with the calendar year limits for this individual, although they have not been exceeded.

I'm looking at the off calendar plan year and ADP test that I am performing for the 2011/2012 plan year. I never get the W-2 information for this client since this is an off-calendar plan year that uses plan year wages.

I realize that the $5500 contributed in December of 2011 is NOT catchup for the 2011/2012 plan year; there is no "catchup" until the participant exceeds a plan limit. I wanted only to explain why this participant contributed $5,500 in December of 2011 and that he personally sees that $$ as catchup for 2011.

That being said - I was trying to clarify that it is ok that the participant contributed $24,360.48 for the 2011/2012 plan year; that the proper contributions are showing in the ADP testing. When I reviewed Sal's off-calendar example it pretty much mirrors my fact pattern so I'm now comfortable with the results.

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Again, how many payrolls do you have entered? In my experience, if you get the correct comp & deferrals into the correct payroll slots, the program will do a good job at making the proper adjustments.

Is this the first year this is happening?

We I get a new (to me) off-calendar plan, I try to recreate the past couple years on Relius. At least the prior year. Everyone gets at least two payrolls: a 12/31 payroll and a PYE payroll. This assures that the correct deferrals are being booked in the correct calendar years. When you run eligibility and the contribution transactions, the correct amounts will be entered on the Plan YTD screen.

In your case, you would have:

12/31/11 5,500

11/30/12 18,860.48

(Don't forget to run a contribution transaction for each payroll date you entered. I made the mistake one time of just running one for the last day and wondered why everything wasn't there.)

QKA, QPA, CPC, ERPA

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

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This is the first year with this issue because this participant was hired in Aug 2011; did not enter the plan until December 1st, 2011. No one else in this plan has ever come close to reaching any of the maximums, individual or plan.

I have only plan year data at this point (annual - one payroll entered). I suppose I can ask the client for the December data for this one individual and then run multiple transactions (as you mentioned) just to be sure that it's working properly for him.

thanks again

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Well, you seem to know how much he deferred in December ($5,500?), so you could probably do it right now. I don't think you really need the comp. Just make sure 415 limit is NOT check in the contrib transaction. Otherwise it's going to tell you 415 is exceeded ($5,500 is greater than 100% of zero).

I'd verify that with the client, though.

(then tell them this would be a whole lot easier if they switched to calendar year! ;) )

QKA, QPA, CPC, ERPA

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

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yes - I was referring to getting just the compensation from the client for Dec. I already had the $5,500 information from the deposits made to the vendor.

I went back and looked at the plan specs....there is one for "allocate excess employee deferral" that was not checked. I checked that box and then reran the eligibility and contribution transactions.

After that Relius is using the $18,860.48 amount in the ADP test and caveating the $5,500 as catchup; showing a total of $24,360.48 for the participant - even when I check the "apply deferral limit" and "apply 415 limit" boxes in the contribution transaction.

This plan isn't even close to failing the ADP test and I feel like perhaps I'm making a mountain out of a mole hill - just want to be comfortable that I am giving Relius the correct information to properly perform the ADP test.....SIGH...

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