I have a client who utilizes top paid group election for HCE determination.

[Guest Why]

They are contemplating a new plan design (OCPP) by Mand Marblestone and Danzinger. The issue is the plan will need to use conventional method for HCE determination going forward.

Question: Can a plan amend mid year to change HCE designation parameters? What if they elect to change plan year-end?

Thanks

[Alf]

No restriction on changing for next year and it should be ok to change 2004 before year end, although if it is not a pure LDY PSP, the IRS may throw down a technical argument that the rule needs to be in place before the beginning of the year.

Is there something in the cross-testing rules that prevents use of the top-paid group election?

[Blinky the 3-eyed Fish]

There is no guidance on when the top-paid election can be changed. A reasonable interpretation (at least I think it's reasonable since I am saying it) is that you cannot change the election if it will cut back an allocation that is earned.

In this case you want to remove the top-paid election which will make more people HCE's than before. It would seem very possible that the new HCE's could receive lower allocations than before when they were NHCE's. But if there was a last day requirement for example, then they haven't earned the right to the allocation and it would seem perfectly reasonable to make remove the top-paid election now.

What does OCPP stand for?

Alf, there is no such rule.

[TBob]

One Class Per Participant

[Alf]

Overly-Clever Promoter Parlance?

[Blinky the 3-eyed Fish]

Why can't Mand, Marblestone or Danzinger answer this question? You would think that at least one of them could come to the phone.

Onerously Congested Pension Professionals

[WDIK]

https://www.mand.com/secure/newsletter/oct2002.html

[Earl]

From the newsletter:

"OCPP plan design is a significant improvement on even a new comparability allocation"

Huh?

[Guest Why]

The One Category Per Participant (OCPP) plan document is very powerful in providing skewed allocations.

Alf - There is no rule against have a TPG election in a cross tested allocation, but the TPG election hinders our strategy

Blinky - Mand has concluded it would be a cut-back in allocation but not having worked with these folks I wanted to take it to a higher level - you guys!

[Alf]

Not to flame, but I am a little surprised that someone as driven as you are to provide "skewed allocations" is worried about a li'l 'ole cutback.

[Guest Why]

Actually our client wants to maximize a select group without minimizing (or reducing) what all others have been getting, I know most employers looking to maximize select individuals don't worry about the little guy - Kudos to my client!

[Blinky the 3-eyed Fish]

Why, you never stated if there was a last day requirement or not. If there is, then you should ask them why they think it's a cutback.

BTW, nearly anyone who does cross-testing can implement what these guys call a OCPP. It's not unique. Be careful though from a business standpoint if you are using this design to completely minimize staff costs. That would entail possibly giving $0 to some employees (if the plan is not top heavy) or giving higher dollars to specific younger employees to pass nondiscrimination testing. With either scenario you have the potential for employee revolt if they talk to each other and figure out one person is getting more than another.

[Alf]

And kudos to you for such a thoughtful rationalization.