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jmartinrps

PS Alloc based on Years of Service

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We have a new plan where the profit sharing is allocated as follows: .067% of plan compensation times number of years of service (max 15).  There are two HCE's, both with 15+ years of service. There are 103 NHCE with a varying degree of years of service. 

How would we test this? Due to the years of service variance of the nhce's the plan would easily fail gateway (if you were to cross test) but is it even subject to that? Would this be a Benefits, Rights, and Features perhaps?

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Couldn't you do the General Test with the rate groups?   I have had a few ESOPs over the decades with a YOS allocation and that is how we always did it.   Since you aren't allowed to do a benefit equivalent basis in ESOPs we never future valued the contribution to a benefit equivalent.  

 

I am not trying to be mean but the lawyer (or whoever) set this up didn't do a projected test to make sure it would pass as set up and in doing so researched this out?  

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I pass ABT, coverage, and non discrimination. But the relius report says I fail 401a4. Granted I cant really use relius since it converts to a benefit equivalent but I would think I look at the simple ps allocaiton percent. To pass the real 401a4 would I need to have enough nhce with the same years of service allocation as the two hce's. In other words take say 8 people with years of service less than 15 and give them an allocation like they did have 15 years of service?

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If you are failing testing on a contributions basis, you will wither have to do an 11-g amendment to get the benefits where they need to be in order to pass testing.  Remember, you cannot reduce an HCE benefit with this method.

Or, you can give everyone the gateway and cross-test it.  My calculation is the GW is 3.35%. ( (0.67 * 15) / 3)

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