austin3515

yeah it does! I actually found a thread with you and Mike Preston from like 10 years ago where you said it just as eloquently... I am puzzled as all get out as to why the Nondiscrimination Answer Book would have said that though. Where is Tom Poje, I never see him anymore, LOL...

I get this all the time with Fidelity and TIAA-CREF. Clients often cannot believe that these giant behemoths could possibly be wrong about anything.

I've seen multiple reputable sources say that you really do have to hit the 70% ratio percentage if you're cherry picking who is in what plan. CuseFan, any additional insight provided? Is that the end of the question? It's just not very detailed and the case in favor of having to pass the 70% threshold seems pretty compelling...

I wish they explained why they came to that last sentence but that is definitely my question. Seems like there is lot to that conclusion left unsaid...

When running component plan testing, we're supposed to make sure the separate plans would pass coverage testing as though they were separate plans. The divvying up of participants would generally not satisfy the nondiscriminatory classification test. 1.401(a)(4)-9 (c)(4) indicates that the average benefits percentage test is deemed to pass for each component plan if the test is passed for the plan as a whole. However, this "deemed passing" does not cover the nondiscriminatory classification test. As a result (so the story goes) the Average Benefits Test is not available to pass coverage for the component plans and therefore they need to pass the 70% ratio percentage. I'm curious to see if others have found differing interpretations. In reading through the ERISA Outline book for example, you would have thought there would be a big disclaimer "Average Benefits Not Available for Coverage!!" but nothing... So for example, Component Plan Testing is being run for nondiscrimination, so perhaps one could argue that the reasonable business classification test doesn't apply (perhaps the IRS came to the same conclusion when they didn't mention this in aforementioned "deemed to pass" reg). I note that my "normal coverage testing" of course is passing no problem. That's the kind of interpretation I am curious to know is out there. Now as many of you have likely discovered, because of the patterns of including/execluding HCE's and NHCE's to pass things, getting the ratio percentage above 70% is not particularly challenging, but I do question whether it is even necessary.

Somehow I doubt clients will see something like this as a fireable offense, LOL... When you're enormous you get to make the rules. Well of course not under the eyes of the law, but in every other sense it's gospel.

That is very very interesting!

Well thats what we do too, but I have a friend who's an auditor who is looking for a good solution to a predicament. If they have to DFVC then so be it, but if its reasonabl to base on asset transfer then, yahoo!

Merger date per legal documents is 3/31/2020, but assets did not transfer until the end of July. No extension was filed by 10/31/2020. Is it reasonable to say that short plan year ended July 31, 2020? That gives until 2/28/2021 to file the extension. Interestingly the plan merged into ADP Total Source and as such my presumption is ADP will only report activity on its won platofrm, not anything before the transfer date.

Fixed typo and Griswold's suggestion. Thanks guys!! Reattached in the original post! People in the office seemed to like it too. I hope this gets some use out there!

Also, it is just not in dispute that if I never actually made the QNEc's in the first place that (a)(4) would be passing. I'm not following why that is not a reasonable interpretation of "excluding QNEC's".

Help me out though. Is it a little but of which came first, the chicken or the egg? The question is, does the gateway requirement apply to a participant who is receiving the QNEC in the "without QNECs scenario"? I get it that your position is "yes" because even though they are testing without QNECs they still have a nonelective contribution so the y really need 10% total to make this work. If you could explain why it doesnt make any sense it would be helpful. I won't repeat my logic again but I can't see where it fails.

yes and when I am running the testing as though QNECS DID exist, I am providing the gateway. If run as though they do NOT exist, then no gateway required. When the reg says "excluding QNECs" it seems to me one possible interpretation of that is "no seriously, I meant exclude them 100%", Language from the reg: The amount of nonelective contributions, excluding those qualified nonelective contributions taken into account under this paragraph (a)(6)... satisfies the requirements of section 401(a)(4).

And a follow up question: I want to allocate exactly 5% as a QNEC to two participants, even though 4% of a QNEC would pass the test. But again if I do a 1% PS to give the GWM then I need to give a 5% PS contribution because i need to disregard the QNEC's. My document (Corbel) says I may give a QNEC "Sufficient to pass testing." Well, 5% is sufficient. IT doesnt say "not exceed what it is sufficient" it only says an amount that is sufficient. So that means to me an amount that is at least sufficient.

Plan allocates 5% profit sharing to all eligibles, but everyone is in a separate allocation group. Plan is not a safe harbor 401k. Plan is failiing ADP but if I do a bottom up QNEC of 5% to both of the lowest paid employees my ADP testing is passed. If I run a(4) testing with QNEC's I can get it to pass because with QNECs they pass the GWM. If I run without QNEC's, they are not getting ANY nonelective and thus require no gateway minimum. Is my logic here correct? The plan passes rate group testing with the two bottom people treated as not benefitting.

https://www.docusign.com/products/identify I was researching about esignatures, which for some reason I incredibly interested in??, and came across this method of identifying that an individual is who they say they are. This sounds an awful lot like something that is very important, especially when some termiated employee comes back 10 years later for their money having moved 3 times, etc. Anyone ever used something like this (or this for that matter)?

Precisely a repeat! Whoops! Obviously there was some reconfiguring/ordering going on. Thanks for looking at it! I revised the attachment in the first post.

see the attached. I'm very happy with this. Every time rule of parity would come up I would research for an hour. I finally wrote this down. Let me know what you think! I would incorporate suggestions and reshare. [Edited to add revised pdf, 1/24/2021 in the early am][Edited to reattach the revised PDF per suggestions/corrections]. Rehires And Rule of Parity.pdf

Another thing to watch out for if you're using that method is to make sure that you look for any duplicates of plan # or EIN, which is common when doing final 5500s for example. Things can get messy very very quickly. It actually took me hours to fix it, so now I know going forward.

We use the sponsors ein for everything and always have. If anyone else is reading the better method of doing this is using the "EIN and Plan Number" method of matching up, as opposed to just the TIN. The latter it's too hard to line everything up.

--> Error: Another payee has the same TIN and Distribution Codes. It comes up when the plan has a 401k distribution and a cash balance plan distribution.

That special rule for missed deferral opportunity in an auto enrollment plan was set to expire 12/31/2020. Does anyone know if the IRS extended it somewhere along the way?

That's exactly what it says. But by the transitive property, wouldn't the same logic suggest that if someone had $300 extra deposited to their account there is no need for me to take out $320 (assuming NHCE)? Sure would be nice to be nice to the employee... Oh and by the way save a lot of time!

When a participant has a small voer-deposit, and there have been gains, in lieu of calculating the applicable gains can we just withdraw the principal? I looked it up in the EOB so I think the answer is no, but the terminology is throwing me a little because I'm referring to a "corrective distribution" just an overdeposit. I assume there is no distinction, but asking anyway because we do spend a lot of time making sure we take as much money as possible from an NHCE which seems silly. 6.j.(1) Losses. If the Earnings are negative, a corrective contribution or allocation does not have to reflect a net loss incurred under a defined contribution plan. See section 6.02(4)(a) of the EPCRS Procedure. Note that this exception to reflecting a loss applies only to a corrective contribution or allocation. A corrective distribution is required to reflect net losses.6.j.(1) Losses. If the Earnings are negative, a corrective contribution or allocation does not have to reflect a net loss incurred under a defined contribution plan. See section 6.02(4)(a) of the EPCRS Procedure. Note that this exception to reflecting a loss applies only to a corrective contribution or allocation. A corrective distribution is required to reflect net losses.

B(iii) at best implies it cannot be done. And D.4 is just regarding the match. Like I said I agree compeltely that it would reduce the safe harbor. I'm just a little floored that they don't say "(including an amendment to the definition of compensation that reduces the amount of compensation that would receive the Safe Harbor)" or something like that. I don;t think it's SO obvious that it's not even worth stating anywhere. Why leave it just implied instead of outright saying it?