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Prevailing wages and 401(a)(4)


Indu
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18 hours ago, Indu said:

Few Employees with PW does not qualify for receiving PS contribution(Did not satisfy eligibility requirement for PS)

Do you mean they didn't satisfy the initial eligibility requirements (e.g. age 21 and 1 year/1000 hours of service), or they didn't meet an ongoing allocation condition (e.g. must work 1000 hours in a plan year to receive PS that year)?

If they didn't meet the initial eligibility, then you can probably disaggregate otherwise excludable employees for testing, and as long as none of these people are HCEs then you don't have to test them.

If you are talking about ongoing conditions, then check and see if your plan document provides for an automatic waiver of the allocation conditions if needed to pass the gateway. If not, then you might need a corrective amendment to allow you to pass testing. If the amendment is made after the end of the year it would fall under 1.401(a)(4)-11(g).

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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If you ran the test with everyone in, without using the otherwise excusable employee rule, then the gateway applies to them.

But, as Corey described, if you run the test using two groups, one group that is over the 21/1YOS cutoff and another that is under the 21/1 cutoff, then it is common that you may be able to avoid the gateway minimum for the group under the 21/1YOS cutoff (the OEE rule).

If the group under 21/1 has no HCEs or that group does need to cross-test for that group to pass, then that group is not required to receive the gateway.

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I meant to tell. For deferrals and PW eligibility requirement is just 21 years and entry date s immediate.  participant A satisfied this and entered the plan and received PW. 
 

For PS the eligibility criteria is 21 years 1 year service and immediate. Participant A is a new entrant to the plan so he did not satisfy this eligibility criteria. 
 

Since  he received PW and which is not equal to 5%. Plan fails gateway.  

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If you disaggregate otherwise excludable employees, your participant A won't have to be included in the gateway test.

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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