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Plan with no last day of plan year elected


Craig Schiller
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I think that is a matter of taste, in my humble opinion. You and I will arrive at the same allocation. I might need an -11g to get there, but then I will always be able to explain to someone in a concrete way that the reason they did not get the extra contribution was because of their employment status/hours worked. And no options are off the table for me as a result of this "inflexibility" because I always have the 11g in my back pocket.

I'm not saying any other approach is wrong by the way. That's just the path that we have chosen.

Austin Powers, CPA, QPA, ERPA

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Okay. Amendments have deadlines and cost time and that costs $, which is why strongly prefer to get to the allocation solution desired without any need for an -11(g) amendment, but only for the plans as described in my post above.

So, if the plan is NOT a 3% will SH, then keeping those conditions are fine, even if each person is in their own rate class. Might stil need -11g, but that is generally rare, as I think you mentioned.

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We might do half a dozen 11g's a year and we have a template, so it's not as though we're spending a lot of time doing 11g's.

In the interest of full disclosure on occasion we do end up in a situation where it can be bit of a challenge to word the amendment to bring in the precise individual we want to, but we've always found a way. Generally it's pretty easy because the populations are small.

Austin Powers, CPA, QPA, ERPA

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I am certainly convinced that unless the reasonable business classification is on the plan level, if everyone is in their own rate group, the plan must pass the coverage test. And if a plan didn't have everyone in their own rate group, not relying on a last day provision as a reasonable classification, since the IRS has stated otherwise.

I do still have some concerns about allocating $0 to someone solely because they terminated after the year is over, paranoid or not. I will not advise clients to not allocate to employees who terminated after the year if that is the sole criteria. But seeing the concensus about it not being a problem in and of itslef, I was comfortable advising the client who asked about this, that it could be done, since the coverage test passes.

My concerns are: 1): The decision is based on criteria that occurred after the allocation date. Unlike an -11(g) change which has a statutory basis, theoretically I was concerned that could be a problem. While one can make the decision after the allocation date, I think of it as if the contribution were being made on that date. 2): I try not to have an allocation that will alienate an IRS auditor. That includes even -11(g) amendments which I don't need to do very often. I think a lot of this is as the person from ETA Consulting said - a matter of preference, + comfort and paranoia.

Thanks all for your comments.

Craig Schiller, CPC

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And if a plan didn't have everyone in their own rate group, not relying on a last day provision as a reasonable classification, since the IRS has stated otherwise.

I think you meant to say was that "if a plan DID have everyone in their own rate group..." Correct?

Also you mentioned passing the "coverage test" in your first paragraph but I think you mean ratio percentage.

Austin Powers, CPA, QPA, ERPA

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