justatester

Thanks for the information. I would tend to agree that the addition to the controlled group would not allow them to rely on the 3 year cycle. However, the client is stating since it is less than 1% change in the population, it was not a significant change. Any thoughts?

Ok, so I tried to find a 93-42. Any ideas where I can locate it?

Here is the situation: Company A & B are part of a controlled group. They performed coverage testing in 2006 (with just the 2 plans). In 2005, Co. B acquired a new company (Co. C). They want to rely on the transition rule for 2005 & 2006. In 2007, Company A&B still want to rely on the 2006 test results and not complete coverage for Company A&B. The demographics of the plan are Co A&B have about 15,000 with 3,000 or so HCEs. Company C has about 100 ees, with 75 HCEs. Obviously, Company C has coverage issues. Company C is to complete coverage including Co A&B as nonexcludable, not benefiting. Can Company A&B use the2006 Coverage Test still in 2007 since members of the controlled group changed? Any thoughts would be greatly appreciated.

Company A acquires a division of Company B on June 1, 2009 through a stock deal. Both companies sponsor 401(k) plans. The division of Company B is immediately allowed to participate in Company A's plan. Company B participants can opt to rollover the assets to Company A's plan. For 2009 HCE determination, do I need to consider prior year compensation of all of the employees of the acquired division? If top 20%, would I consider all employees of the division in 2008 or just the ones active at time of acqusition? What if Company B did not have a retirement plan, would I need to consider prior compensation? What if the division of Company B assets were transferred/merged into the plan-For top paid calculation, would I consider all employees of the divison sold in 2008 or only those active at time of acqusition?

I have a plan (plan A) that acquired another company (company B) through a stock deal as of 12/31/08. The participants in Plan B's plan were terminated and given the option to rollover their money to Plan A's plan. I am trying to determine HCEs for the 2009 plan year. Plan A uses the top 20% rule and it does apply. Do I need to include the employees of Company B. Normally for Stock deals, I would say yes, but since Plan A is not a successor plan I am thinking no. Also, Company A did give credit for prior service for eligibilty & vesting. Any help would be appreciated.

Also, if one of the formulas fail, and an amendent is made to increase the matching level for another group, what type of contribution should it be? Does it have to be 100% Vested?

So just to clarify The following would be the groups: When testing formula/group 1: It will include group 1 When testing formua/group 2: It will include groups 1, 2, 4 When tesitng formula/group 3: It will include group 3 When testing formula/group 4: It will include 1, 4 Do I have it correct?

Hi, I know I have asked this question in some manner before, but I am still having a tough time with this topic. Plan with multiple match formulas: Group 1: 50% up to 6% Group 2: 50% up to 4% Group 3: 10% up to 8% Group 4: 50% up to 4%, plus 25% on next 2% Group 5: No Match For BRF, would I run the test as such- Group 5 by itselft Groups 1&2 Groups 1&4 Group 1 Group 3 Does this make sense? Thanks for your help!

That is my logic, but I can't find anything to support it.

They are not permissively aggregated for coverage testing. Each plan passes coverage on their own taking the other plan into consideration. So the plans are treated separately for ADP/ACP. So does that mean the plans can be treated separately for BRF. For Plan A, a BRF is not required. For Plan B, since there are two match formulas, a BRF would be required. I guess my quesition is when running the BRF for Plan B, do I need to treat Plan A participants as non excludable not benefiting?

I need some direction... Here is the situation: Plan A and B are part of a Controlled Group. Each plan on passes Coverage. Plan A: Match formula is 100% up to 3% Plan B: Match formula is 100% up to 4% for Location X and 50% up to 10% for location Y Since there are differenct formulas within Plan B a BRF test is needed. When running the BRF test, do I only consider the employees of Plan B? Or do I have to considered all employees in the controlled group. I have always been under the impression that once a plan passes coverage ALL discrimination testing is done on the plan basis not the controlled group basis. Any thoughts would be greatly appreciated as well as regulations for reference!

I was thinking since the plan was amended to change from a multiple to single employer that would be considered a significant change thus the transition rule would be out. I was also thinking that if the plans had been separate and had merged assets as of 1/1/08 there would be no transition rule. Since everyone is under one plan document and assets are under one trust, wouldn't that same theory apply?

Here is the situation: Company A owns 50% of Company B. Both Company A & B participate under one plan as a multiple ER plan. Effective 1/1/2008, Company A buys the remaining 50% of Company B, therefore creating a single employer plan. Company B is now a participating employer. When they were a multiple ER plan, all testing was done separate. For 2008, how should the testing be handled? I am thinking, it would be one test, since in theory, the assets "merged" together effective 1/1/2008. The employers would not be able to utilize the transition rule and continue to due ALL testing separate for 2008 and 2009. Of course, they continue to have different levels of benefits for match (BRF test) and Profit Sharing (General Test).

another follow up question.... Since you have to defer at least 3% to receive the additional match, how do I count those participants who would have been eligible had they deferred 3%. Also, if the most generous match the additional 4.5%, fails how do I fix the problem....based on my numbers, I need 1 additional NHCE to receive the match, can the client amend the plan now to allow for a handful of additional NHCEs to receive the match?

I have several questions regarding the treatment of the otherwise excludables.... Plan information: 12/31 PYE, Prior Year Testing Method I need to rerun the 2007 ADP/ACP Test. Since we are beyond the 12 month correction period, I believe I can not disaggregate the otherwise excludables into a separate group. Since the plan uses the prior year testing method, what averages do I use? In 2006, the plan did apply the otherwise excludable option. Do I now need to do a weighted average to adjust the 2006 average to be used in 2007. In addition, since I am not allowed to disaggregate for 2007, how does that impact my 2008 test? For 2008, can I disaggregate? Any help would be appreciated!

Ok, so would I be double/triple counting people. For the group that receives the 7%--they actually receive the base, plus the 2.5, plus 4.5%. For example, someone who receives the base, plus the 2.5%, plus the 4.5%, would be counted in all three levels?

Hi, This is a very interesting thread....I have a very similar situation. Everyone is the plan receives a base match of 150% of 1 and 50% of the next 4%. There are two additional matching formalus for other groups: one gets an additional 2.5% of compensation if deferring at least 3%. The other one gets 7% of comp if deferring at least 3%. So, I don't believe I have a coverage issues since everyone is entitled to the base match. I do believe I may have a BRF issue. When I am breaking down my subgroups, the first group is the one who is actually receiving receiving the additional 7%, second group is the parts receiving 2.5%, and the third would be everyone else. Does that make sense?

Dumb question, I am reviewing the filing instructions for the 5330. I might have missed it, but I don't see who the check is made payable to? IRS? DOT? Any idea...

Ok.... So my plan that is a Temp Agency, needs to amend to allow some of the non staff people in. Do they need to let all non staff or can the allow just some? Basically, they need 2 more people to benefit and then they pass coverage.

That is what I thought, but the client asked so I thought I would just confirm.

I have two different situations I am currently working with. 1) Our client is a Temp Agency. They have about 30 "staff" employees that are allowed to participate in the plan. (of the 30 staff employees 5 are HCEs-2 of which are owners that are excluded by plan design) They have 1300 "non staff" employees (they are the folks that go temp at other employers). They exclude these people from the plan. We were able to work down the number to 42 people who would have otherwise been eligible had they not been in an excluded category. My coverage ratio is 65% but unfortunately they do not pass average benefits. I am stuck on how to advise how to fix. Can they make the 3 participating HCEs distribute their money due to the coverage failure? I know they can make a qnec or allow these non staff into the plan to fix it, but that would be very costly. Any other ways to correct? 2) Different employer: The plan has multiple divisions. 2 of the groups do not provided for a match. Of course these 2 groups have most of the NHCEs. On top of the coverage issues, the groups that have a match, they have multiple matching formulas. The most generous formula is the one most of the HCEs receive. They client wants to retroactively amend their plan so that the HCEs do not receive a match for 2008. Is this possible? Any help or guidance would be greatly appreciated!

Thank you for the input. I will now go back to my client.

Hi, I am working on the testing for a plan. Stated in their plan document is a limit of 5% of deferrals for HCEs. Also, the HCE matching formula is stated as 0%. (NHCE 50% up to 6%) My problem is the plan sponsor is defining HCEs as employees whose base salary is greater than the limit. For example, if my base is $80,000 but my OT is $30,000 for a total of $110,000. I am not considered a HCE for purposes of the limit or the match--which means I can defer 10% and receive the match). I know their is some flexible in discriminating against HCEs, but since they are not following the terms of the plan would this be considered an operational/plan defect?

Hi, We have a plan that acquired a division of a larger plan. They are not transferring the assets to our plan. They are not looking a compensation prior to acquistion for HCE purposes. However they are crediting prior service for eligibility and vesting. My question is for determining the otherwise excludables, do we use the acquistion date (3/1/08) or do we use original hire date?

Ok...thanks for the feedback...based on the post, it seems that it is possible to have overlapping controlled groups. For testing, it makes sense to treat them as "separate employers". That is what we were thinking. So, basically run each group separately. Process ROEs for the first group. For the second group, reduce the ROE amounts by the amount previously distributed from the first group. Am I correct.