Kevin C

Depending on what the amendment did, they may still be on the 6 year cycle for DC plans. The answer to your question should be in Rev. Proc. 2007-44, SECTION 19. EFFECT OF EMPLOYER AMENDMENTS OR ADOPTION OF INDIVIDUALLY DESIGNED PLAN ON SIX-YEAR REMEDIAL AMENDMENT CYCLE.

Not unless the other HCE's are limited to 5% of pay. Otherwise, the plan won't pass the universal availability requirement for catch-ups. The last sentence of 1.414(v)-1(e)(1)(i) says "However, a plan may not provide lower employer-provided limits for catch-up eligible participants."

This plan did not pass the general test with all NHCE's getting the gateway. It wasn't solely due to this participant, but, this participant did affect who we had to increase to get it to pass. We tried what Lou describes before we tried testing with participant A excluded. Between the two methods, it works out slightly less expensive testing with A excluded.

We use Relius software. Fixing the software isn't a practical solution due to timing issues. The client wants their contribution number this week. Having A included in the testing with an infinite allocation would definitely make the testing much easier. They do not pass average benefits with A excluded. This plan has 18 NHCE's including A. Four of those are mid-year entrants. They won't pass if we test using full year comp unless we increase contributions to several NHCEs. Besides, I have a feeling the IRS would frown on using one comp definition for gateway and a different one for the rest of the cross testing. There's never been any question that A gets the $180 TH minimum. Yes, that triggers the gateway, but A's gateway amount is zero, so she is receiving more than the gateway. The plan uses individual rate groups, so we can give A any allocation amount we want. But, the issue is the same whether A gets $180 or $1,800. With zero entry date comp, it's an infinite allocation rate if A gets anything. We're going to test with A excluded. Given the options, that seems the most reasonable. Thank you all for your input.

Mike, thank you for the quick response. The plan document specifically says to use entry date compensation for determining the gateway. If we treat A as having a zero allocation, doesn't that create a gateway testing issue? That's what the system is doing and it says we fail gateway because a benefiting NHCE receives a zero allocation. We tried giving A entry date comp of $3,600 so that her allocation rate would be 5% like most of the NHCEs. She is about the same age as the owners, so my hope was that she would not be in any of the rate groups. But, she ended up being in 2 of the 9 rate groups. We had several rate groups that were barely failing until we increased contributions to an NHCE, so I'm thinking excluding her may make it easier for those rate groups to pass. It seemed a bit unreasonable to exclude her if it looked like it would help the testing.

Mike, I agree. I think A is getting more than the gateway, but how do you treat A for a4? We are testing using entry date comp and for Participant A, it's zero. An infinite allocation rate, while mathematically correct, doesn't seem like the right way to test.

BG, the gateway is 5% of entry date comp. 5% of zero is zero. A receives $180, so A is receiving more than the gateway. My gateway testing issue is that our valuation system freaks out and lists A with zero allocation, zero comp, a zero % allocation rate and says the gateway test fails. $180 / 0 is infinity, which is well over .05 (5%). Tom, That would make life easier, but the client insists A is still employed. The TH minimum goes to participants employed at year end, so we don't have any choice. No services in 2016 would affect the 2016 TH minimum if A is still employed at 12/31/2016, but I don't see it having any effect on the 2015 TH. If the full year comp was zero, I agree A wouldn't be in the test. Unfortunately, that isn't the case here.

21 & 1 with semi-annual entry 3% Safe Harbor using entry date comp New Comp PS allocation, entry date comp, HCE’s receiving >15% of comp. Plan is Top Heavy NHCE Participant A hired 3/1/2014 and worked over 1,000 hours in first 12 months. A's work schedule changed to “as needed” 4/1/2015. Employed on 7/1/2015, and entered the plan 7/1/2015. Still employed beyond 12/31/2015, but no compensation during 7/1/2015-12/31/2015. A has $6,000 of compensation in 2015, all of it prior to 7/1/2015 and receives $180 of PS as a TH minimum since she is a participant and employed on the last day of the plan year. Anyone had this situation come up before? If so, what did you do for gateway and (a)(4) testing?

I'm with Belgarath on this one. Since we are talking about a reasonable rate of interest under the PT Exemption in 2550.408b-1, the definition used might be helpful.

The universal availability rules for 403(b) deferrals discussed above don't apply to matching contributions. Unless you are talking about a church plan, having the match would make it an ERISA covered plan and using something like the <20 hour per week exclusion for eligibility for the match would violate ERISA. Of course, they could accomplish basically the same thing by requiring 1,000 hours during the year as an allocation condition for the match. The non-elective and matching contributions in a 403(b) are subject to the same coverage and discrimination testing that they would be in a 401(k). See 1.403(b)-5(a).

So, how many of your new comparability plans are using average benefits to pass some of the rate groups? For ours, it's less than half. We even have a couple of new comp plans with the owner's spouses contributing 90% of pay that don't pass average benefits, so their rate groups have always had to pass ratio percentage. I can see this change being significant for some plans, but for the 60 yr old doctor/dentist/lawyer with a young office staff, will this really change anything? I'm not convinced yet that the sky is falling.

You are mis-reading III D If you meet the requirements listed in III D 4, a mid-year change in the SH compensation definition that increases matching contributions is now allowed. A mid-year change in the SH compensation definition that reduces the match is still prohibited by 1.401(k)-3(e)(1) and 1.401(m)-3(f)(1).

This is straight from the final regs. It actually says the plan fails to satisfy 1.401(k)-1(b). SH plans are not allowed to contain language that provides for ADP testing if there is a problem with the SH. So, an improper amendment means you fail to satisfy a qualification requirement. I've heard a number of speakers say an improper amendment ruins your SH status, but all along, the regs have said the consequence is plan disqualification. Your profit sharing provision change issue is addressed. It says:

Yes.

We used to have a client with a pair of plans like that. The person who set the plans up edited a standardized prototype MP adoption agreement to make the contribution a match on the deferrals in the 403(b). No, they did not submit for a determination letter. When we took over the plans, we restated using a VS MP document modified to include the necessary match language, submitted it as a minor modifier and received a determination letter. Other than the document being a pain and the match being subject to the QJSA rules and MP in-service distribution restrictions, it worked basically the same as it would have if the match had been set up using a PS or 401(k) document. With the last restatement I did, the agent reviewing the determination letter request said she thought it didn't qualify as a minor modification, but relented when I reminded her it was approved that way for the prior restatement.

We use ASC documents. They are definitely worth a look. Their documents are flexible and their support is outstanding.

That is correct. But, it's too late to avoid 2016 RMDs from those old 401(k)s. You would have had to rolled over in 2015 to avoid the 2016 RMDs.

Relius sent the kind of e-mail you want on 12/4/2015. It doesn't have the detail you are looking for, but they did send something.

If your plan document doesn't restrict what you can use, you should be able to use any 414(s) compliant compensation definition for testing. Our VS document has the following in the definition of Testing Compensation:

Section 415 compensation excludes a minister's housing allowance. See PLR 8416003. This predates the final 415 regulations, but it looks consistent with the new regs. PLR 8416003.pdf

A late interim amendment should be $375 regardless since this would be the only failure included in the submission. The 50% reduction is not needed, but could be used for ANY nonamender failure that is "SUBMITTED" within one year. So, to your original question, the one year period is driven by when the package is submitted (implying no signature is actually required by then). However, since the failure pertains on only interim amendments, then you qualify for the $375 fee regardless. Also worth mentioning, the $375 fee and the 50% fee is equal only when there are 20 or fewer participants. If the plan is larger, then the 50% fee may change. However, the $375 fee is fixed under it's applicable circumstances. Good Luck! jpod has it right. The filing must be submitted by the end of their current RAP to qualify for the $375 fee. Some IRS agents started doing it that way a couple of years before this rule was first published in Rev. Proc. 2013-12, but that's a different discussion. As for the timing of getting the Board to approve the amendment, I have a couple of questions. First, can the Board approve something via a conference call instead of during an actual meeting? Second, has anyone ever had the IRS question who signed an amendment?

I don't know about John's situation, but mine is a single employer plan covering food and commercial workers union employees.

We have a similar issue with a prospect's union plan with a weekly profit sharing allocation that requires 28 hours in the week to receive the PS contribution for that week. i contacted an ERISA attorney at our document provider and his response was that there is no clear guidance on the issue, but he has always taken the position that you can not require more than 1,000 hours in a year as an allocation condition in a DC plan. He interprets §2530.200b-1(b) as preventing an allocation requirement of more than 1,000 hours in a DC plan. Rev. Rul. 76-250 seems to imply that you can require more than 1,000 hours in a DC plan. There is also the possibility that the IRS could treat it as a disguised service based eligibility requirement since it would effectively prevent a part-time person barely over 1,000 hours from ever receiving an allocation. I wonder how common this type of provision is for union plans?

It's been mentioned a couple of times, but I did not see any responses addressing what the plan document says. Our VS documents (EGTRRA and PPA versions) have the following language in the definition of Compensation Limit that should remove all doubt:

Does the plan provide for auto rollover of cashed out vested balances of $1,000 - $5,000? Your description sounds like you don't have an automatic rollover IRA provider for the plan. With our VS documents, the missing participant provisions only apply to those under the cashout limit and for someone with a $1,000 - $5,000 vested balance, the automatic rollover provision (if used) applies first and prevents you from using the missing participant provisions. Missing participant provisions typically forfeit vested balances after a due diligence search. If you have an auto-rollover IRA provider who requires a participant signature before accepting the funds, you need to find a different IRA provider. We use Millennium.