Senior Pension Admin

This is actually a 2 part question for me: 1. I have a client in which a certain class of employees earn regular wages from the company as well as prevailing wages from the contract company. I know that since prevailing wages and the regular wages are part of the W-2 income, the plan cannot exclude prevailing wages. However, prevailing wages can be used to offset employer contributions. Will the prevailing wages used to reduce employer contributions also reduce the total reported income on the W-2? 2. When combining the regular wages and prevailing wages, some of these employees will be classified as HCEs (solely based on compensation) when their YTD total wages are prorated. Is there a way for these people to remain NHCEs? I'm trying to reduce/eliminate as many issues so that the plan can operate smoothly. The prevailing wages was quite the bombshell when I found out about it.

If you put it in the sense that Plan A covers 9/20 NHCEs rather than 9/9 NHCEs, then I had the feeling it wasn't going to pass gateway or average benefits test. That was originally what I thought. Thanks

Thanks for the tip. There won't be any classification changes during the year as it will be consistent throughout. The one plan approach will not require an audit as it is still considered a small plan. Both plans will have the same definition of plan compensation, eligibility, vesting and ownership. Here is the breakdown: Plan A: 2 HCEs, 9 NHCEs (wants 3% SH + PS for all eligible employees) Plan B: No HCEs, 11 NHCEs (wants 3% SH only for all eligible employees) My concern is to ensure there is no operational failure and to see if 401(a)(4) testing is needed aggregately. Do you see any issues that I will need to be aware of? Or am I good since the plans pass 410(b) testing independently?

Both plans pass 410(b) testing on its own, but not aggregately if the client wanted to have their cake and eat it too. The employer's goal is to not have to provide a profit sharing contribution to a certain group of employees (fall under the same class) but wants to allocate profit sharing to themselves and a few other employees that they specifically want to retain belonging in different classes.

An employer wants to have 2 separate 401(k) plans to exclude a certain class of people from receiving a profit sharing contribution. So let's say Plan A and Plan B. Plan A will exclude participants that will be in Plan B, Plan A will have the owners maxing out their 415 limit as well as paying some staff 10% PS and the rest enough to meet minimum gateway. Plan B will have only a specific class of employees with identical eligibility, but the employees that have met the service requirement will get a 3% SH contribution only. Will the plans need to be tested aggregately for gateway? Or will just passing 410(b) suffice? I'm seeing if it's worth it for the company to have 2 plans or just have 1 plan.