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cross-tested 401(k) - failing gateway for terminated empoyees


M Norton

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I have a client - a one-physician office, wife manages the office - with SH 401(k).  Plan provides the SH NEC 3%, but has last-day rule for PS allocation.

8 NHCEs, 2 of whom terminated during the year, so they get the 3% in addition to their deferrals, but no PS.  I pass coverage at 75% but I can't get through the gateway because all the terminated are getting is 3% instead of the 5% needed for the gateway. 

I need to allocate 2% to them to get through the gateway using FtWilliam basic plan document.  Can I use  an 11(g) plan amendment to allocate that 2% for 2019?

Thanks!

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Here is what Section 4.03(b)(1) of our FTWilliam basic plan document says:

Quote

  (1) Allocation of Profit Sharing Contributions.  Profit Sharing Contributions shall be
allocated to the Profit Sharing Contribution Accounts of each Participant eligible to share in such allocations
pursuant to Subsection (a)(1) in the manner described in the Adoption Agreement. If the Adoption Agreement
provides that the Plan uses a New Comparability allocation formula, the Company may waive any requirements
to receive an allocation for a Participant who does not otherwise satisfy such requirements for purposes of the
Company satisfying the Minimum Allocation Gateway requirement
of Treasury regulations section 1.401(a)(4)-
8(b)(1)(vi) or 1.401(a)(4)-9(b)(2)(v)(D). However, in order to qualify for the waiver of the previous sentence, a
Participant must also be: (1) a Nonhighly Compensated Employee; and (2) eligible for another allocation
(including, but not limited to, a Top-Heavy minimum or a 401(k) safe harbor non-elective allocation) that is
taken into account in determining whether the Plan satisfies the non-discrimination requirements of Code
section 401(a)(4) with respect to Non-Elective Contributions.

 

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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