Blinky the 3-eyed Fish

Yes, it is. My recollection is that one of entry dates must be the first day of the plan year. Ah, I went and looked something up. See 410(a)(4).

I am not sure what you mean by this. If it is that the owner gets included as an HCE because of his ownership (>5%), then yes, you are correct. But the context of this discussion is the top paid election. So, if you mean that the owner gets included in the top paid group because he is the owner, then that is incorrect.

Because the children are under 21, their shares are attributed to the father. Transferring ownership had no affect on the controlled group issue here, so the purpose escapes me. Because this is a controlled group are the 2 plans being tested together? Business B certainly wouldn't pass coverage on it's own with only HCE's there. Is that your issue? And/or are you concerned that a 5 and 10 year-old are receiving large salaries? This of course does not pass any sort of smell test, and although I have no specific experience on how an IRS reviewer would handle the situation, I could only imagine it would not be favorably.

You don't back out any 401(k) contributions, catch-up or otherwise.

Perhaps an illustration would help. If you are doing the testing for 2003, you look at 2002 information. 80 employees less 40 exclusions (under 21, less 6 mo. employed, etc.) leaves 40. 20% of that is 8. The 8 people who earned the most AND had compensation over $90,000 are HCE's based on compensation. See how the owner and the fact that he is a HCE does not factor into this calculation. It is compensation based only.

What does your document say? A well drafted document would certainly be able to provide the QNEC to only those affecting the testing, but.....

The issue is that you have an $X profit sharing contribution that the existing participants have accrued the right to. Now by amending the plan and allowing additional participants you are reducing $X by giving some to the added participants. That is the argument that the amendment would be an impermissable cutback under 411(d)(6). The reality of the situation is that the contribution after the new employees come in may be $X + $Y, and that the existing participants may not be affected. This would be an argument that it is not a 411(d)(6) violation. I believe that the IRS holds the former view of the situation though.

You don't say what type of plan it is, but I assume it's perhaps a profit sharing plan. Your first issue is if you amend the plan now and make a profit sharing contribution, then you, IMHO, violate the 411(d)(6) rules by adding additional people to receive the profit sharing contribution. I am sure some may argue this point. Also, you cannot simply allow the HCE's to enter the plan and not the staff. That would be a discriminatory amendment.

Why don't you call them and have them explain what they mean by "there is a right way and a wrong way.." and have them explain the differences? Your experiences with pricing are the same as mine.

Very nice, chowd.

Party pooper. How about a little somtin', you know..., for the effort?

I am a bit confused by the question. The W-2 summarizes in total the deferrals made during the year by the participants. Why would you think you couldn't use it?

Yes, the TH is a nonelective contribution, but there could be participants receiving the TH that do not have an entry date into the nonelective portion of the plan. Consider the participant in my example and perhaps a participant who would enter the 401(k) portion 4/1/03 and the PS 1/1/04. You agreed that for testing, I can use compensation from 7/1/03 - 12/31/03 for the former, but what about the latter? It appears I am stuck with 4/1/03 - 12/31/03, because he has no entry date for the nonelective portion. In other words, a participant hired sooner has testing compensation over a longer period of time. What would you say to amending the plan to provide that those participants who have entered the 401(k) portion of the plan and who are employed on 12/31, should enter the plan on that date. Now they have a date of plan entry to the PS portion and I could conceivably use compensation for testing of 1 day. A full year's TH contribution tested over 1 day of compensation would yield a fantastic EBAR to be sure. I guess this is what I "am trying to get away with". I have never done it before, but am just trying to be creative.

A calendar year top heavy 401(k) plan has 3 month eligibility for the 401(k) portion and 1 year for the nonelective portion. The cross-testing is done using compensation from date of plan entry as an acceptable definition under 414(s). Say a participant enters 10/1/02 for the 401(k) and 7/1/03 for the PS. For 2003 testing would you agree that for the determination of the nonelective EBAR, I could use compensation from 7/1/03 - 12/31/03, but for the 401(k) EBAR for average benefits, I would use full 2003 compensation? If you agree to that, move to this next question. For those participants that just enter the 401(k), but have not met the nonelective eligibility and are thus just receiving a TH minimum, what compensation is acceptable to use? I have no entry date to the nonelective portion. Thanks for your time and thanks for the vine. (If you know what this means, then I salute you.)

I had the same initial response, but after reading the title, I think both the nonelective and match are being given.

How does your document read? Whether it is everyone receives the same percentage of compensation in the group or more likely that the contribution for the group is allocated in the ratio that compensation of the individual is to the total compensation of the group. Either way, you also have controlling 415 language in your document. So, you can designate $X for the group and allocate it as the document reads. If X is high enough, the higher paid owner's allocation would otherwise exceed the 415 limit, and then should be redistributed to the other members of the group. In other words, it is possible as long as your document allows for this.

There is not a moratorium any longer on all cash balance plan determination letters. I have received some recently.

You aren't going to find anything concrete on that. There are prior discussions on this board on the subject if you perform a search.

Andy, I would classify it as a methodology I hadn't considered, not a disagreement. Truly, it's been about 4 years since I had a maximum lump sum calculation affect anyone, but with the rebounding stock market, I plan on some client investing in the next Dell. At that time I will incorporate Mike's calculation.

I have some questions: How did you do the calculation when the limit was $160,000? Is the motality rate the chance of dying in a motel? Ok, I will try and be a bit helpful. Here is a discussion on maximum lump sum calculations. http://benefitslink.com/boards/index.php?s...993&hl=lump+sum If this doesn't help, try fisticuffs.

I see now what you are saying Mike.

Mike, can you do that when dealing with a pension plan?

The answers are in your document. Is there a regular nonelective contribution being made? Are you sure the standardized document doesn't give contributions to those that work 500 hours OR are employed on the last day of the plan year? Are the allocation requirements only for the regular nonelective contribution or for the top heavy as well? It is possible that the right to receive a TH allocation is still just employed on the last day no matter the hours worked? Does the document only give the TH minimum to non-keys or are keys getting it also? Seek and ye shall find.

No. Remember that one of the components of the 415 annual addition limitation is 100% of compensation. Without any compensation, his annual additions are limited to 0.

Flosfur, I don't think you are getting my point. It is not the general test or the use of permitted disparity that is a facts and circumstances test. Rather I am specifically discussing the ability to use testing service other than what is used by the benefit formula. It is almost like a gateway situation. First you must determine that the testing service being used is not discriminatory. If it is not, then you can proceed to the general test using that testing service. If it is discriminatory, then you are not allowed to use that definition of testing service in the general test. I found some discussion on this in the ERISA Outline Book 2003 Edition Ch 9 Section XI Part E.