AndyH

Merlin, the sales person benefitted. The CSV went to him. Sorry, I could not resist.

smhjr, the solutution to your situation is to put her in the same group as the NHCEs and to restructure the plan into component plans for testing purposes and test her on a contributions basis. If you give me some details on the eligible population I'll try to give you an example.

I believe it was individual classes. I thought I still had the Q&A but instead I have a link to it that is no longer valid. Sure, I'd love to see the outline.

You know quite well that it is not what you said but how you said it. If you want to bait some of the regulars here that know your tactics that is one thing, but you should ease up on the new people.

Merlin, I refer to the argument that a 0 allocation has the same effect as an eligibility exclusion based upon name or some other individual reference that is not reasonable based upon objective business criteria. Therefore, the argument goes, the average benefits test is unavailable. Yes, this is a coverage issue only. I recall this from a Q&A at an ALI-ABA session a couple of years ago. Positions and opinions do change of course, and I cannot speak to the conference to which you refer. But this position is in print and I happen to think that it has merit. Regarding #2, yes, I agree that these issues are always difficult; I just think they become more difficult when there are multiple parties to the decisions and that more decisions need to be made. But this is just from a practical administrative perspective. Theoretically it is terrific. Maybe it belongs in a classroom like some of the economics theories I learned in college; not necessarily the real world. Just an opinon, that is all. But thanks for the comments. Your views and comments are always appreciated.

Hey GBurns, that rude comment is out of line. Once again.

The reasons why IMHO this is a very bad idea could include the following: 1. The plan could fail coverage if it does not pass the ratio/percentage test. 2. It could be nightmarish to administer. Who decides the amounts, and when, and what happens when they change their mind? What happens if the allocations fail 401(a)(4)? How would it work for a partnership? What do new employees get? What about top heavy minimums?

If I may chip in after looking up the word "caustic" on dictionary.com, what is a TPA? Is not the first word "Third", as in not the sponsor and not the investment provider? As mbozek asked initially before becoming "caustic", why would a "TPA" be making these decisions and writing checks from a 401(k) plan?

For those who frequent short attention span theater, the MVAR using 417(e) for a plan with no subsidized early retirement benefit would be the actual lump sum which would be paid by using the increase in the accrued benefit during the measurement period divided by the plan's J&S annuity rate at the current age, multiplied by the J&S annuity rate at the current age using testing assumptions, then projected to testing age at the testing interest rate, divided by the life annuity APR at testing age using testing assumptions. Then divide that by average pay and by testing service.

If there are two participants, one hired December 31 and one hired January 2. Both terminate during the year and get no benefit. I say one is nonexcludable and non benefitting, the other is excluded and excludable. Aren't you saying that both are nonexcludable and nonbenefitting?

I'm trying to convince someone that the prohibition on restructuring of 401(k) plans does not apply to the testing of a profit sharing allocation in a plan with both profit sharing and 401(k) features. I know the answer is that the testing is completed after the PS and (k) portions are mandatorily disaggregated, that they are for testing purposes two different plans, but I am having trouble finding anything in print that says that in plan English. Certainly in-depth analysis of the regulations would lead you to that conclusion, but plan English in one sentence or paragraph is not easily found. Tom, maybe you can add that to the next edition of the Coverage and Nondiscrimination Answer Book. It's implied in many places, but ....... Any suggestions?

Well, I see the eligibility requirement as 1 second of service as of 1/1 and you see it as none, so there is a difference in perspective there. As to terminees, if they worked one second as of 1/1 then they are not excludable; otherwise they are, or so it would seem under my argument.

Here is the link: http://benefitslink.com/boards/index.php?s...ic=9479&hl=mvar

Blinky, I use the method outlined in detail by Doug Goelz in a 2001 post that pensionnw references. Maybe somebody can link to it. In addition, ASPA's C-4 study guide had a detailed example prepared by either Joan Gucciardi or Norman Levinrad (co-authors) which I learned from, except that the edition I was using had an error in it which Joan confirmed. That was a few years ago and I have not checked recent editions to see if it was corrected. I'll dig out a sample calc when I get a minute. (Jury duty is over!)

SoCal, How might that work if the short year ends before the first quarterly would be due? Does that mean no quarterly in such case?

I am unconvinced of this as well. Why does the plan have two sets of eligibility requirements for the year? I see it as one, 1 hour of service as of 1/1. Then you have a plan amendment effective in the second year. Now I could see an argument for a 401(a)(4) violation on the grounds of discriminatory timing of an amendment, but I'm not getting the "most liberal eligibility" argument. That pertains to the ABPT when there are more than one plan. I don't see how it applies here. Blinky, I'll accept a learnin, but it looks like a hard subject to teach. p.s. Is the issue that there are two entry dates and the waiver only applied for the first? Then ya might have an issue. Absent that I don't get it.

Gary, the most creative maximum deduction I can think of in this situation would be generated by a DB and MP using the flip flop funding technique. But I would never want to administer it. Anybody who would should be buried in Grant's tomb with the horse.

If you look at the "Explanation of Provisions" section of the Cross Testing regulations issued 6/29/2001, you will see that "employee" is an employee who benefits under the plan for purposes of 410(b). Since under 410(b) the match is mandatorily disaggregated, it is irrelevant. What is relevant is whether they benefit under the profit sharing plan. If they do not receive a top heavy minimum, and they are not eligible for the nonelective/cross tested contribution, they are not benefitting and therefore they are not an "employee" for purposes of the cross testing regulations. Therefore they are not required to get the gateway.

Why are they not getting a top heavy contribution; are they Key Employees? If so, are they also HCEs?

That is exactly how sales guys sell these things. Actuaries aren't needed. And now a days cross testing is as easy as pushing a button, right. Just hope the sales guys don't learn the term flip flop funding. That would be slick and shiny.

Great. Thanks. More welcome!

No. I don't see why it would. The allocations need not be reasonable; just the criteria for who gets benefits. The amendment might say that for the year ending ______, in order to satisfy the nondiscrim..... requirements of ........, the plan is amended to include in class B the minumum number of NHCEs, ranked by youngest age, necessary to satisfy the general nondiscrimination test. Just one example.

10. Tell em that for a living you disaggregate component plans, impute permitted disparity, and normalize most valuable accrual rates. Need more please quick!

Then that is an amounts issue, not an eligibility issue, so I don't think that has any impact on the testing other than the improved results. But I would still devise a rational approach anyways.

quinn, if I understand your question correctly it is a good one. I think you are concerned about the precondition that the eligible group be defined in a reasonable manner, based upon objective business criteria? And I assume that you are referring to a corrective amendment under 11-(g)? We default to identifying new participants by either hire date or birth date, or by reference to their status in the test, but in any event we do not define them by name. The amendment tells you how to determine who to bring in, not who to bring in. I think that would satisfy the objective business criteria condition. Naming them or listing by SS# could create the issue that you have alluded to.