Logan401

So, for the accrual component plan, you must include all the NHCEs & HCEs in the respective denominator even though some are in the contributions component. In this case, if we add an additional NHCE to the accrual component, we have: 2/10 NHCE ratio 1/2 HCE ratio The result is 40%, so we are above the 27.75% and no big fog horn. And, just to confirm my first question, Integrated is an automatic pass? i read the "regs. say don't sweat it" part, but you also mentioned coverage testing. Thank you!

That is what I was trying to convey. A pro rata allocation will pass as long as it is tested on a contributions basis. So, what you are saying for Integrated is the same. An automatic pass as long as you are testing on a contributions basis. Similar as we implied above, if we assume there are 2 HCEs and 10 NHCEs: HCE1= 20% allocation HCE2= 5% allocation 10 NHCEs= 5% allocation We can test the HCE2 with 9 of the NHCEs on a contributions basis, and HCE1 with 1 of the NHCEs that has an equal or higher EBAR on a benefits basis. Is it as easy as this?

A pro rata allocation automatically passes the cross-testing rules. I would think that the same would apply to an Integrated allocation, but would like confirmation on that..

Very good to know, thank you Tom!

Thank you Tom. So, let's assume HCE1 that is owner's son and 29. He can be placed in his own component plan & be tested on a contributions basis with maybe 1/2 of the NHCEs. Can two of the HCEs be accrual tested in one group of NHCEs, and the remaining HCE accrual tested in his own separate group with another group of random NHCEs? I am assuming the number of NHCEs in each component plan does not matter?

Cross-testing allows you to restructure the plan into 2 or more component plans. The key words I am interested in are "or more." Can you split the plan into 3 component plans? A plan consists of 4 HCEs, ages 64, 55, 43 & 29. It also consists on 16 NHCEs of various ages. Can we test based on HCE1 & HCE2 in one compnent, HCE 3 in a 2nd, and HCE 4 in a 3rd? Also, does it matter how you divvy up the NHCEs into the different component plans? Thank you!

If I was to base my examples strictly for 2014, someone deferring $5,500 can then receive a $52k PS as long as they meet all regs, etc.. This example would provide the participant with $57,500 in annual additions. Someone that deferred $4,500 would reach $56,500 in annual additions. Got it!

Hi Tom, Thank you very much with this informative reply! So that I understand, a participant would have to defer at least $5,500, and then he/she can receive a $52k PS. If a participant deferred $4,500, then he/she can receive a $51k PS, correct?

A little late jumping in on this, but is it possible an Employee can receive a full $57,500 in profit sharing? John using your example for the 415 dollar limit, what if the participant did not defer the $5,500?

It happens quite frequently that a adopting employer of an MEP makes a decision to change payroll providers, and adopts the new payroll providers plan. Let's assume the prior plan was effective since the beginning of the year, leaves the payroll company in April, 2013, then adopts their new plan with an effective date of July 1, 2013. I assume they must continue the safe harbor match with the same per payroll formula in the successor plan. I am questioning the period of transition where they did not have a payroll provider from May through June. Do we go by the terms of the initial plan that stated "compensation per pay period to be used to calculate safe harbor match", so technically, since no payroll was run in May & June, no safe harbor match is required?

No, there was no 401(k) taken out during that period. Maybe another issue in itself?

No one got paid for 2 months? yes, they did get paid, however not via payroll provider.

I also must add that the successor plan rule does not work the way you described. If you terminate a 401(k), you are not allowed to set up a successor 401(k) within 12 months after all assets have been distributed from a terminated plan. You can certainly set up a successor plan, and merge the balances from one plan to the other if no distributions were made from the prior plan.

I disagree. if your plans utilize a per payroll safeharbor match formula, and you are truing them up at the end of the year, you are changing the formula which is against safe harbor rules.

Let's assume it is a spin-off from an MEP to another MEP. Are you saying that because of the switch of plans, the formula changes to annualized?

My question is in regards to a plan that has a safe harbor match using the per payroll period formula. An employer is in transition to change payroll providers, and adopts the new payroll provider's plan. They will continue the per payroll safe harbor match in the new plan. What if there is a two month gap between the last payroll of the prior plan, and the beginning payroll of the successor plan? Is there a safe harbor obligation for the gap period, or is the obligation only there for those payroll periods actually made in the prior plan and successor plan?

We administrate a New Comparability plan that also has an outside CB plan. Under the normal conditions of the New Comparability plan, if you are not employed on the last day of the plan year, you are not eligible to receive a PS allocation. The plan is not safe harbor, and no employees received a nonelective contribution. if the terminated employees received a CB contribution credit, must they also receive the minimum gateway contribution in the PS plan?

Okay, thank you Lou!

Is it possible to have two separate match formulas in a plan? There are no HCEs who work for the non-profit company, and the question was asked if 2 groups of employees can have separate matching formulas.

Thank you all. I found under IRC 414(l) where you can merge a DB plan into a DC plan. Very helpful information.

Does the facts that DB plans have promised monthly benefits at retirement & most are covered by PBGC federal insurance valid reasons to not merge into a DC?

The SIMPLE plan ended contributions12/31/2012. The new plan was effective 01/01/2013. We plan on merging the SIMPLE into the traditional 401(k) plan they have with the MEP. On a side note, I would also like to know if a DB plan can merge into a DC plan.

The client adopted onto an MEP, so they requested a merger of their Simple 401(k) into their successor plan.

Can a Simple 401(k) Plan be merged into a Traditional 401(k) Plan?

A client has had a new Comparability PS plan for 10 years, and the groups are Owners & All Other participants. Client started a new CB plan in 2012. 1st Question: Can the CB contributions be included towards the minimum gateway contribution? 2nd Question: CB administrator sends his report saying that the All Other participants need to get more PS to make CB plan work. The additional PS in his report is not pro rata, as each participant in this group has different %s. When adding the CB contribution though, they do become even. I think that the actual PS portion must be pro rata amongst the EEs in this group for this to be okay. Do you share the same belief? We can amend for next year to make each participant in their own group, but I would like to know what can be done for 2012. Thank you!