KCA

Thank you both.

Employer sponsors two plans – one is a cross-tested profit sharing plan with a 1-year service requirement; the other plan is a 401(k) plan with immediate entry. Each plan can pass coverage testing independently and the profit sharing plan can pass 401(a)(4) testing with and without including deferrals. The PS plan is top-heavy with key employees participating. The 401(k) plan is not top-heavy since key employees do not make deferrals and do not have account balances in the plan; however the key employees are not specifically excluded from participation. Since the 401(k) plan does not specifically exclude key employees from participation must the plans be aggregated for top-heavy purposes thus requiring top-heavy / minimum gateway contributions for employees with less than one year of service? If so, would amending the 401(k) plan to exclude keys employees from participation change the answer?

Thanks Tom, that's the answer I was looking for!

A participant who is catch-up eligible and is an HCE by means of attribution has compensation of $30,000. If she defers $15,600 and receives a profit sharing contribution of $20,400 she will exceed her IRC 415© limit by $6,000. Can I treat the $6,000 as a catch-up contribution and only include $9,600 in the ADP testing or must I run the ADP test first using the entire $15,600? In other words, is there an order by which a catch-up contribution must be determined if the deferrals do not exceed the 402(g) limit? In this example, her deferrals in excess of $9,600 would cause a failure of the ADP test requiring corrective distributions to participants who deferred $18K.

In determining if a profit sharing plan for an association is top-heavy, is an officer of the association who earned over $165,000 last year a key employee? Obviously, there are no key employees due to stock ownership but is an officer/participant in an association a key employee? I have found references on line that state that the top-heavy rules do not apply to a plan of an association but that statement seems to contradict the Treas. Reg. § 1.416–1, T–15. T–15 Q. For purposes of section 416, do organizations other than corporations have officers? A. Yes. For purposes of the top-heavy rules, sole proprietorships, partnerships, associations, trusts, and labor organizations may have officers. This rule is effective for purposes of determining whether a plan is top-heavy for plan years which begin after February 28, 1985.

Thanks Tom. Your explanation and references is exactly what I was looking for.

So are you saying you wouldn't include in (a)(4) testing a participant who terminated with over 500 hours who doesn't receive a contribution for the year due to not being employed at year-end?

Thank you both. That is what I have always done but I was recently told that if 410(b) coverage is passed with them includable not benefiting then I do not need to include them in 401(a)(4) testing at all.

If a cross-tested profit sharing plan is written to exclude a group of employees such as associate attorneys, non-shareholder physicians or even an individual by name, those employees will not be eligible to participate once they meet the plan’s other eligibility requirements such as age and service. Therefore, they will not need to receive a top-heavy MB if they are non-keys, they will not receive a safe harbor contribution (if SH plan) and will not need to receive a minimum gateway since they are not receiving an employer contribution. Questions: 1. They must be included in 410(b) coverage testing as non-excludable, not benefiting; correct? 2. Assuming that coverage testing is passed with those employees not benefiting: a) Must they be included in 401(a)(4) testing with a zero contribution? b) If no, can they be included in (a)(4) testing with a zero contribution? c) Do the answers to a or b change if employee is an HCE or NHCE?

I like that answer, thanks!

Can a small profit sharing plan that otherwise meets the requirements for filing a Form 5500-SF but has a life insurance policies file a 5500-SF? Do the policies qualify as "eligible plan assets" or does that fact that there is insurance in the plan require a Schedule A, thus requiring a 5500?

Correct, but read the plan closely to ensure this provision for the one year wait on rehire exists. It appears to be the case, the One-Year Break in Service provision was selected in the AA. The BPD states . . . Rehired Employees. Subject to the Break in Service rules under Section 2.07, if a terminated Employee is subsequently rehired, such Employee will be eligible to participate in the Plan on his/her reemployment date 2.07(d) One-Year Break in Service rule. Under the One-Year Break in Service rule, if an Employee incurs a one-year Break in Service, such Employee will not be credited with any service earned prior to such one-year Break in Service for purposes of determining eligibility to participate under the Plan until the Employee has completed a Year of Service after the Employee’s return to employment. . . . thanks for help!

I have a profit sharing plan (no 401(k) provisions) with a 2-year service requirement; a One-Year Break in Service rule and a Nonvested Participant Break in Service rule (Rule of Parity) for eligibility. A participant was hired in 1994, entered the plan in 1996 and terminated employment 1997 receiving a payout of their 100% vested account balance in 1998. Now in 2012 they are being rehired. Question #1 – The Rule of Parity does not apply because the participant was vested when they first incurred a break in service; correct? The fact that they have not been a participant since 1998 is irrelevant; correct? Question #2 – Since the plan also has a One-Year Break in Service rule the participant does not re-enter the plan immediately on the rehire date but instead retroactively to the rehire date after the completion of 1,000 hours; correct? Question #3 – The vesting is full and immediate so they are immediately vested in the 2012 contribution. However, what if the plan required 2 years of service for vesting and had the One-Year Break in Service rule for vesting?

As I thought. Thanks for you help.

Keeping in mind that these are two separate plans, is it possible to use permissive aggregation in the rate group testing that includes the terminated participants in the testing but with no beneft (-0- EBAR)? In this way, I only include their 3% NE SH contribution in the ABT test but not in rate group testing. That way I won't need to bump them up to the Min. Gateway.

The terminated employees are receiving a 3% SH NE in the 401(k) plan. Because of that, don't I need to provide them with a bump up to the minimum gateway in my plan since I am using permissivie aggregation in the rate group testing? The document is an ASC DC VS which has the following language: The special gateway contribution will be allocated to all Nonhighly Compensated Benefiting Participants who have not otherwise received the Minimum Gateway Contribution without regard to any allocation conditions otherwise applicable to Employer Contributions under the Plan.

Situation: Client has two plans (different TPAs) The plans have the same eligibility requirements (1-yr /age 21) with duel entry dates. Plan #1 is 401(k) providing 3% NE SH Pan #2 is cross-tested profit sharing plan that requires 1,000 hours and year-end employment for a contribution. Both plans pass coverage testing without aggregation but I would like use permissive aggregation for rate group testing so that the 3% NE SH contribution can be utilized when testing the profit sharing contribution. The profit sharing plan allows for a special gateway contribution to be provided for all Benefiting NHCEs who are not otherwise receiving the minimum gateway. This will be provided to the participants who have terminated employment with over 500 hours. The question is can I exclude the participants who terminated with < 501 hours from receiving the special minimum gateway contribution? If not, are they included in the rate group testing?