justatester

Ok...another twist.. Employer D also sponsors a 403(b) plan..Does that impact coverage?

I have group of plans that are all part of the same controlled group. Here is the breakdown... A: 401(k) with Match, a Service Based Profit Sharing & "transitional" contribution to those over 50+ years old B: Profit Sharing Only C: MPP D: MPP with AT & Match We are struggling to ratio test and the ABT test do not pass. It may pass with some creative plan aggregation, but wanted to check on some questions: 1) Can a MPP contrib be aggregated with an Employer/PS contribution? If yes, I assume then aggregated for general. 2) Can the AT & Match portion of MPP be aggregated with the ACP test for the 401(k)? Any thoughts?

It is a start up plan for 2012, so we are trying to reduce the failure on the ADP side. The plan document states to use current year method, however we have time to amend by 12/21/2012 to use prior year. The deemed 3% looks like it will be higher than the projected NHCE average. If we go with prior, then we have the option of 3% or actually depending on which is higher. The "shifting" seems to be very aggressive. I think it would be hard to explain if audited the shifting of a contribution to improve results that was not actually made. Understanding, you can only use the deemed 3% in the first year. So, it is only a one year solution.

What we want to do is shift the "ACP" to the ADP? Can we assume that the deemed 3% contributions was a QMAC even though the plan did not exist prior to 2012?

I have a start up 401(k) Plan. The client previously had a DB/403(b) plan. Both are now frozen. The plan is failing the ADP/ACP test. The match in the plan is qualified..therefore is available to reverse borrow. My question is if the plan's testing method is prior and they decide to use the "3%" option for both ADP/ACP, can I borrow the extra from the ACP to improve the ADP results? HCE ADP 6.13 ACP 2.59 So, if I use 3% for ACP I have an excess of 1.7%. Can I add the 1.7 to the deemed 3% to get an NHCE average of 4.7 which would be a pass?

So, I am being told that prototype documents are permitted to have an allocation date. AND, it does not have to be in the plan document in would be in the board resolution. This does not seem correct. So the plan is failing the ratio test (the document does not permit the use of the ABT test). The correction method as directed by the document is to move the "last day" back to include enough employees until the test passes. However, they are not failing for that reason...they are failing since the did not give the contribution to anyone hired post 1/24/11. So what would the correction method be. My first thought is they should give the contribution to all employees hired post 1/24/11 and still employed....which I am getting push back on. The plan would then pass. Thoughts?

Thanks for your response... SO I am hired 7/1/11 and still employed as of 12/31/11 (Plan has no age/service requirements and immediate entry). Am I entitled to the 2011 contribuion of $500? The plan says no since I was not hired by 1/24/11, but I say yes, because that date is not an allocation condition stated in the document.

ok...So we have (at least internallly) agreed this is a 2011 Plan Year Contribution. So, my question now is: I am being told that (even on a prototype document) that the allocation formula (flat dollar) is set by the plan document-however, the amount and the allocatin date is within the discretion of the plan administrator. Is the correct? It seems to go against the spirit of the prototype document. Here is the opening language in the document.. "A participant will share in the Emloyer Regular Profit Sharing Contribution for a Plan Year if (and only if) he/she is an Active Participant in the Employer Profit Sharing Component at some time during the Plan Year..." The rest of the section does say you have to be employed by a certain date or set any other allocation conditions. Can the employer do this? If so, how do I count the people hired after the 1/24/11 date that was set and still employed as of 12/31/11?

Some more information that I have received: The plan amended effective 1/1/11 to allow for a flat dollar amount and removed the last day provision. The plan funded the contribution on 1/28/11 then an additional contribution on 3/1/11 for 12 additional participants who were hired in the first 3 weeks of Jan. Then amended the plan effective 3/1/11 adding back the last day requirement. This whole thing seems a bit fishy to me.

When completing the 2011 test, we were told it was a 2011 PS contribution. It did not pass coverage (on a prototype document so no ABT). We went back to the client and asked him to review the population. He then said it was for 2010 and it was not initially included in 2010 test. . Additionally, there is a last day requirement which they are counting as 1/24/11. If I count as 2010, would those hired in 2011 have 415 excesses? Clearly, the client is not really following the terms of the plan. I am not sure which is his best course of action.

It was $500 without regards to compensation.

I have a client that gave a $500 employer contribution to employees. I am trying to figure out which plan year it belongs to. The client is insisting it is a 2010 contributon, but the client gave the $500 to employee who were hired in Jan. 2011 as long as they were employed as fo 1/24/11. My thinking is the last allocation condition was int 2011 so it would be a 2011 plan year contribution. Is it possible it is both a 2010 and 2011 contribution. Because they also gave the contribution to some employees who termed in late 2010. I am not comfortable calling in it a 2010 Plan Year contribution since at least some of the EEs were not even hired until 2011. Any thoughts would be greatly appreciated.

I have a company that has 2500 regular payroll employees. They also have 1200 "leased" employees. These "leased" employees have been working for them for years and the turnover rate is very low. So they meet the definition of "substantially full-time for at least one year". The leasing company provides benefits to these employees. The leasing company has its own plan. I am trying to determine whether or not they need to be considered for our coverage test. If I count them as non-excludable, not benefiting, my plan fails the ratio test. My plan is on a prototype document which has "fail-safe" language so the Average Benefits tests is out. I know the definition of leased ees is tricky, but they sure seem like leased to me. Does the fact that the leasing company has its own plan make a difference. Any guidance would be greatly appreciated!

Ok...I get what you are saying...So if I aggregate B & C together (B only matches to 5% and C matches to 9%), I would then need a BRF. I guess in theory I could aggregated A, B & C together for the deferral portion since all are SH for that. And then aggregate for coverage B&C for the match side. Technically, I would only need to test the match portion from 5.01-9% in the ACP test for (A & C). But it is easier to test the entire match. I just didn't think you could consider aggregating for coverage a plan that is fully SH (both pretax & match) vs one that is not? Aggregating B&C passes ACP (total Match). Not sure about BRF, but should be ok since it has lower thresholds.

Yes, exactly..Plan B is failing because other members of the controlled group do not participate in their plan. Yes, Plans A, C & D all pass coverage as stand alones. I am not sure I have any aggregation options. Plan A uses prior year for ACP testing (they match to up to 9%), Plan B is both ADP & ACP Safe Harbor, Plan C usues current for ACP testin (they match up to 9% as well). Plan D is not a Safe Harbor plan. Based on this, what aggregation options do I have?

Tom--thanks for the information about the otherwise excludable option and applying to only one member of the controlled group...Do you know if the regulation that would back that up. Also, is it just our prototype document that has "fail safe" language or is the typically of prototype documents? In Sal's book, it seems to suggest if after you have "activated" the fail safe language and you still fail...ABT might be available? Any thoughts?

ok...so here is the actual language... If the Plan is a non-standarized plan, and would otherwise fail to statisfy the coverage requirements of Code 410(b) for a Plan Year because ofa requirment that a Participant complete a specified number of (greater than 501) hours of Service during the Plan Year or be an Employee on the last day of the PY in order to receive an Employer Contribution, then the Hours of Sevice requirement will be redued by one, and one again (but not below 501) until a sufficient number of individuals receive a contribution to pass the coverage requirements of Code 410(b). If the Plan fails to statisfy coverage after such process, then the last day requirement will be applied by treating all individuals wo were Employees on the day before the last day of the Plan Year, and the day before again, as having been employeed on the las day of the Plan Year until a sufficient number of individuals receive a contribution to pass the coverage requirement. It is a non-standarized prototype. I don't believe I have any options to aggregate since they are SH plans. As mentioned, some have an ACP testing requirement. Are you suggesting I could aggregate Plan B & C together for ACP testing, butt then I would need to run BRF? Hope this adds some clarity...

I have a group of plans that are part of a controlled group... Plan A: QACA SH, but requires ACP test since match above limit-uses prior year Plan B: QACA SH-No ADP/ACP testing requirement Plan C: QACA SH, but requires ACP test-uses current year Plan D: Not SH Plan B is on a standardize prototype document with "Fail Safe" language for coverage failures (ie: 1000 hrs/last day). Of course, Plan B does not pass the ratio test. Plan B does not have a last day/1000 hours requirement. Since the plan is not failing coverage because of this, is it possible to run an ABT in order to pass coverage for prototypes? Another question...Can I NOT apply the under 21/less than 1 YOS option to group B for all testing and apply it to all other plans? Of course in each case the denominator would be the entire controlled group (A, B, C & D) Example: Plan B coverage denominator would all employees. Plan A's test would be divided in to 2 "groups", those over 21/1 yos & those under 21/1 yos and the denominator would have all of the other plans divide as well. Any thoughts?

Hopefully this explains what I want to do..For purposes of this question, let's assume only pretax money. Plan A:complete coverage on its own but not testing the "otherwise excludables separately". Count all of Plan B & C as non-excludable not benefiting. Plan B: Complete coverage with two tests-those who meet statutory minimums and the otherwise excludables. Counting A & C as non-excludable not benefiting. Plan C: Since PR plan just test those independently. I guess my question really is can you test coverage for different plans within the controlled group sometimes apply the "otherwise excludable" option and sometimes not-as long as your denominator represents the entire controlled group? I want to be able to test the ADP sepearately for A, B, & C. For A (not applying otherwise excludable), For B-applying otherwise excludable, and For C (PR plan)

Yes..23 people earned over $110k from July 2010-December 2010.

I have 3 plans in the controlled group. Plan A, B, & C. (Plan C is a Puerto Rico Plan) 2011 Plan Year Test If I apply the under 21/Less 1 YOS option to testing (disaggregation). Plan A does not pass this portion of the test-since those from plan b & C in this category are not benefiting. The plan has 23 HCEs that were hired in after July 2010-(plan has semi annual entry). Plan B passes coverage for this group. My question is: Can I run plan A on a non-disaggregated basis therefore running the ADP/ACP non-disagg basis (not separating the under 21/less 1 YOS)? Then run Plan B testing the under 21/less 1 YOS separately for coverage? If I can do the above, how does it impact how the BRF test would be completed? Plan A has a service based match? Would that then be completed in the same manner for each plan? (running each group applying the under 21/less 1 YOS differently) Any thoughts would greatly be appreciated!

Thank you for the reply... Follow up question: If plan is beyond 12 month correction period and opts to correct with one to one qnec method, do they include the amount recharaterized to catchup in the amount of the qnec?

Question: When completing the Form 5330 for Excess Contributions due to an ADP failure...Is the amount that gets recharacterized as catchup contributions subject to the 10% excise...If it is not subject, do you have a regulation reference?

Another thought...If the plan decides to go forward with this formula...would the ADP still be considered Safe Harbor and then we would be required to run an ACP test. Or can they not change it mid year at all and it would impact the ADP Safe Harbor. They realize they would lose the ACP Safe Harbor.

Thank you for your comments...I guess my "gut" was right. I just could not pin point what was making me think it.