justatester

My plan has immediate eligibility for pretax and 1000 hours for match. I have that have less than a year of service and of course one of them contributes. I am trying to figure out how to run my test. Our initial thought was anyone who is match eligible be tested in the "Main" group...but this is easier said than done...So here our my options I think? 1) Based on 12 mos/semi entry: 3 HCEs-only one of which is match elgible. Run ADP/ACP test which both pass. Run coverage in the same manner 2) Treat the plan as those who are match eligible vs those who are not match eligible. Run coverage the same way. Please let me know your thoughts! Thank you in advance!!

Ok..let's say one of the rate groups falls below 70%...Avg Benefits would be needed to pass. At that point, I would bring in the DB in order to use a lower ratio correct?

Ok...here is some more detail... 27 HCEs. 27 NHCEs. All participants receive a 10% ER contribution. Plan wants to give an additional 15% contribution to 2 HCEs On a DC basis, the plan does not pass general testing. On a DB Basis, plan passes with all "ratios" well above 70%. Since they are all above 70%, I don't need to go to average benefits, therefore do not need to bring in the DB plan's allocations. Is this correct?

I have a plan that needs general testing. The plan does not pass on a dc basis...However, they do pass on a db basis. My question is can they be tested for general testing on a db basis as a stand alone plan if they have an active db plan? Or if we go to a db basis do I have to aggregated the db plan in? Both plans pass ratio coverage testing.

I am not sure if that what the reg intended participants to be limited, but that is how we handle the situation. I would agree in either case only $16,500 should be tested.

Wouldn't the participant be limited in calendar year 2010....as of 2/28/2010, he has $1600 in catchup up which leaves $20,400 for availabe 402(g) between March 1 and 12/31/2010 ($16,500 in reg def and $3900 in catchup). So he is not able to put in the full $22,000?

ok...let's assume that for 2010 plan year, the plan has no age/service requirement to to be eligible for pretax or match. However, for match, you must work 1000 hours and be employed on the last day. A NHCE who was hired 2006 would be otherwise eligble for the match. However, the person terminated on Jan. 15, 2010. I am trying to determine for coverage purposes would they be "excludable" because they did not work more than 500 hours. Or, would be non-excludable not benefiting? Hope this make sense...

Coverage question: For profit sharing contributions, if the plan has a last day/1000 hours requirement, if a participant terms with less than 500 hours, they can be counted as "excludable". Does the same hold true for matching contributions?

Effective 12/31/2008, plan A participants become 100% vested and merge into plan B which has a 5 year graded schedule.. Anyone hired after 1/1/2009 is subject to the 5 year graded schedule. So if I was hired by plan A in Feb 2008, as of 1/1/09 I am now 100% vested. If I was hired by plan B in Feb 2008, I am subject to the 5 year graded schedule. Does this require a BRF Test? If so, how do I break down the groups? Plan A employees vs plan B employees, or years of service and anyone over 5 year in plan B as 100% and test them with Plan A employees? In addition, there is a 3rd plan in the controlled group with a different schedule. Can I simply count them as nonexcludable-not benefit?

Rev. Proc. 93-42 1.01 states "Specifically, the guidance applies for purpose of substantiating that a plan satisfies the following requirements:...and nondiscrimination with regard to an alternative definition of compensation under section 1.414(s)-1(d)(3) of the Income Tax Regulations....Unless specifically provided otherwise, this revenue procedure does not apply to the special nondiscriminatory amounts test under section 401(k)(3) or (m)(2)." Section 5 of this rev. proc provides the standards under which an employer can rely on a prior year's test but it seems to be excluding the ADP/ACP tests... Ok...so does that mean If a plan is required to perform a 414(s) compensation test because they use a non-safe harbor definition of compensation for their 401k and 401m test (test compensation), are they required to perform this test on an annual basis? (The compensation used for their 401k and 401m test is the same as their eligible plan compensation.) Or can they complete 414(s) testing every 3 years?

A plan has immediate eligibility for full time employees. Part Time Employees must work 1000 hours to be eligible for the plan. When running the coverage test, how do I count the part time employees. Non-excludable, not benefiting since none of them worked 1000 hours? Or are they excluded since they did not meet 1000 hours? Would it raise a BRF issue since the "right" to defer is delayed for this group/class of employees? Any help would be appreciated!

I understand that ps contributions are not part of BRF. The BRF question comes into plan since plan 1 has 3 separate levels of match depending on the location/employer. (1=50% to 5%, 2= 50% to 6%, 3= 50% to 2%) Plan 3 has a match of 50% to 4%. When running the BRF test do I test all 4 levels of match? As far as the PS contribution for plan 1, group 1 receives a 4.5% contribution-Mostly HCEs in this group. Group 2 receives a 3% contribution-mostly NHCEs. Group 1's ratio is 47%. Group 2's ratio is 98%. Tested together as one "plan" they pass ratio. However, it is my understanding that since the "rate" is different, they would need General testing. Would the General test only test these 2 rates?

In plan number 1, you either receive the 3% or the 4.5% contribution, but not both. If receive one of the ps, then you do not receive the MPP Contribution. I understand that BRF is separate from General Testing...My question was whether or not Plan #1 & 3 need to be tested together for BRF. Hope this makes sense.

I always get confused with these tests..... Here is the situation (3 Plans): 1) 401(k) Plan with Match (with multiple match formulas) and 2 separate PS contributions (3% and 4.5%) 2) MPP Plan with service based formula 3) 401(k) Plan with Match Everything passes coverage on its own (taking the CG into consideration) except the 4.5% contribution. I can "aggregate" the 3% & 4.5% to pass the ratio test. Doing this would then require General Testing. Question: for the General Test-do I just include the 3 & 4.5% contribs or do I need to include the MPP contribution? If I don't include the MPP, it is subject to its own General Test, Correct? For BRF, I would "test" each level within the first plan and count the level in the 3rd plan as not benefiting? In other words, they would be in the denominator of the counts? Or do I have to "test" their level against plan #1's?

We have a client that has two participants who had distributions paid in 2009 with incorrect vesting calculations. The correct vesting was calculated and paid to these participants in 2010. The client wants to know if they now need to answer question 4L on the Schedule H ‘Has the plan failed to provide any benefit when due under the plan’ as a ‘Yes.’ Any help would be greatly appreciated!

I am pretty sure this transaction is wrong on many levels, but not sure even where to begin. Plan susupended their match. It had about $200,000 in the forfeiture account. The plan used the forfeitures to fund pretax contributions. So, they plan "withheld" $500,000 in pretax contributions and only wired $300,000 in funds and used the forfeitures for the balance. Pretty sure this is some sort of prohibited transaction...Please let me know your thoughts. Would this be considered "criminal"? As recordkeeper, what is our obligation to report this and to whom do we report? Thanks!

Ok...what about applying the Statutory minimums (disaggregation) beyond 12 months after the plan year ends?

We have a very complex controlled group set of plans. One of the members does not pass coverage....They now want to be aggregated with one of the other members....We ran the 2008 Test in a timely fashion and it passes. They now want to rerun the 2008 test including this other plan. If we do this, can we apply the "statutory minimum" disaggregation rules still? If we do the test will pass. If we don't, it will not. In addition, they can only want to do this for the ADP test and not the ACP test. The plans have different testing methods (CY vs PY) for ADP and ACP. (which of course is a silly plan design because it limits the types of plan aggregation)...So Can your "covered" group be different for pretax vs match vs profit sharing? Any thoughts greatly appreciated.

Thank You! That's what I figured, but my brain is not working very well this morning.

Thanks for the responses...couple of follow up questions... When you say restructure the plan, do you mean just on paper or actually separate them into two separate trusts? Do I just run separate coverage tests by each contribution?

Here is the situation: Plan makes a Safe Harbor 3% contribution. In addition, they make an additional 4% ps contribution that has a last day/1000 hours requirement. Normally the last day/1000 hours would be tested through coverage but since both ps contributions are tested together that feature is not being tested. So in practice, you have some participants only receiving a 3% contibution and some receiving the 3% and an additional contribution. So not everyone is getting the same "level" of benefit. Does this require "general" testing.?

Ok...so say you bring it to the client's attorney and the client's attorney does not have an issue if the plan has 415 excesses? In this plan's case, it is a match "true up" that causes the issue. So each and every year, by allocating the true up contribution, they cause participants to exceed the 415 limit.

Thanks for the feedback...So what does one do when the plan sponsor refuses to change their practice? As a recordkeeper what is our obligation? Ok..so for 2009 they make the correction by distributing the excess through pretax. In happens again in 2010...what do they do?

OK...so I have a plan that typically fails 415 due to a very large profit sharing contribution. In most cases, all of the employees pretax ($16,500) amount needs to be refunded to "correct" the failure. Is this still permited? What about EPCRS? How does that now come into play? I believe this is now considered an "operational" defect, but it does not seem to change the correction method. The plan does not intend to change their practices and will still have numerous 415 failures every year. Any thoughts, guidance would be greatly appreciated.

When determining HCEs for a Puerto Rico Test, is there any flexibility in the rounding method? For example, with 16 employees, 1/3 would be 5.33. So should there be 5 HCEs or could there be 6? Any thoughts, greatly appreciated.