Belgarath

Yes, but I don't understand what you are getting at. Are you saying that this DC plan may use average annual compensation for nondiscrimination testing, (i.e. use 2017 W-2 compensation for contribution amounts, but for testing those contribution amounts, use a 3-year average of W-2 compensation for 2015-2017)? I've always understood that yes, you can use different 414(s) definitions for contribution amounts and nondiscrimination testing, but they would be different definitions for compensation for that plan year, where the plan is using current year compensation for accruals.

The plan uses current year compensation. No fail-safe method is applicable if testing fails.

I've only seen two uniform points plans in my life. We've just been given a situation where such a plan failed nondiscrimination testing, cause the formula (which has apparently always worked well in the past) heavily weights contributions based on years of service. One of the owners retired unexpectedly one month into the year, and the plan waives the normal 1000/last day requirement for retirement on or after NRA. Since his comp was so low, (only one month comp) former owner gets something like 60+ % of pay, so the average for the HCE's is too high to pass testing. Although I don't have hard data, it appears that restructuring won't work, or at least not at a contribution level that is possible/palatable. (Query - does the prohibition against uniform points n one of the restructured plans apply if the plan is uniform points to start with, or does it apply only if you are attempting to restructure to a uniform points plan where it isn't ALREADY a uniform points plan?) Ok, so you go to rate group testing, which also fails. An 11(g) amendment could be done, but here's my question: when you do such an amendment for this type of plan, I assume that any corrective amount/increase to the necessary number of NHCE's must still be allocated (or calculated) on the uniform points allocation formula in the plan? Or to ask it another way, can you simply assign random amounts to random participants like you can in an "everyone in their own group" profit sharing plan, or must you somehow amend the plan to increase the formula for a select group of NHCE's, so that they get (x) points for each unit of compensation, rather than "y" units that they get under the current formula? I suppose it ultimately has the same effect, as the formula would be adjusted for those selected individuals to achieve a passing percentage, so it is ultimately the same thing. Ugh - if now going to the rate group test, is it going to have to pass gateway? Or is the fact that the basic formula is a uniform points allocation which isn't subject to gateway a saving provision? Or, is there a better way to do all this? I know the 11(g) amendments are pretty flexible, but I've never run into this particular situation. Thanks!

Thanks, but I'm not worried about current availability - that piece passes just fine. But the effective availability seems problematical. Are you saying that you think effective availability in this situation is ok? None of the new hires will EVER be able to receive the higher match. (Now, if some of the new hires were HC, then I might feel differently.) Thoughts?

The old different match rates conundrum. Employer wants to keep existing match level for all current employees, but use a lower match rate for all new employees. Passes current availability testing just fine (for now) but since current employees include ALL of the HC, I don't see any way for this to pass effective availability. Anyone have any bright ideas on this?

Just want to make sure I'm not misrembering - the 7-day "safe harbor" under 2510.3-122(a)(2) it is for plans with fewer than 100 participants at the beginning of the year. The 80-120 rule does NOT apply - it is for 5500 purposes only. I just saw it used for the 7-day safe harbor deposit rule for a plan with over 100 participants at BOY, so I want to make sure I'm not nuts before questioning this.

My non-expert opinion is no. There are certain exceptions in the regulations that allow election changes in various circumstances, but as far as I can tell, this isn't one of them.

Here's the excerpt from the regulation - emphasis is mine. This is why I'm concerned. (ii) An individual becomes a participant covered under an employee pension plan— (A) In the case of a plan which provides for employee contributions or defines participation to include employees who have not yet retired, on the earlier of— (1) The date on which the individual makes a contribution, whether voluntary or mandatory, or (2) The date designated by the plan as the date on which the individual has satisfied the plan's age and service requirements for participation, and (B) In the case of a plan which does not provide for employee contributions and does not define participation to include employees who have not yet retired, the date on which the individual completes the first year of employment which may be taken into account in determining— (1) Whether the individual is entitled to benefits under the plan, or (2) The amount of benefits to which the individual is entitled, whichever results in earlier participation. It seems to me that even if in an excluded class, you have satisfied the AGE AND SERVICE requirements for participation. Anyway, I thank you all for your opinions.

Flyboyjohn - the employer will not exclude any NHC's, hence my original question. I'm still concerned that the DOL regs bring in excluded employees who have satisfied the eligibility requirements. Any opinions on whether I'm interpreting the regulation incorrectly? A common sense interpretation seems like if you can't participate because you are excluded, you shouldn't be counted as a "participant" - but a literal reading can lead to the opposite conclusion. I'd love to be able to take the more liberal interpretation, and I wondered if anyone had wrestled with this particular situation before. Thanks.

Isn't that a bit strong? What if the employer wants to make discretionary matches in excess of 4% of compensation, just as an example? Can't do it if using the ACP safe harbor. What if they want to consider elective deferrals in excess of 6% of comp when determining match? Seems like you have more flexibility (potentially) if not using the ACP safe harbor?

Maybe we'll just set up two identical plans and permissively aggregate them for coverage/nondiscrimination testing. I generally dislike such an approach, but it'll actually save them money...

New plan to be effective 1/1/2018. Participant count will apparently be 101, so audit would be required. What if the 2 owners are excluded? Are excluded employees who have otherwise satisfied eligibility considered "participants" for BOY count purposes? The 5500 instructions don't seem crystal clear on this. If they don't have to be included, we could exclude the owners, then amend the plan, say, February 1 to bring them in. Seems a little too cute, and the consequences of not filing with audit if required are, of course, draconian. The phrase "earning or retaining credited service" in the 5500 instructions makes me nervous... P.S. - FWIW, it seems to me that under 2510.3-3(d)(1)(ii)(A)(2) you are still a participant, even if in an excluded class.

Gracias.

I don't work with these plans. Say a business has 500 employees, of which (pick a number - let's say 90) are highly compensated - say a giant medical practice, or a corrupt political campaign organization... Are these plans limited to a "select group of management or highly compensated employees" similar to a 457 plan, or are there no limits on who/how many can be covered? Please don't waste any time on this, as it is a quick general question. If it requires any research, PLEASE don't bother!! Thanks.

You know the old saying, "Common sense is the least common of all senses."

I'm with Kevin on this.

Well, my understanding has always been that you can ALLOCATE it for the prior year as long as you make the contribution within 30 days after the expiry of the 404(a)(6) period. So in your case with an extension to 9/15/2018, you could contribute the PS contribution for 30 days after the extended deadline, and ALLOCATE it for 2017. Then you'd deduct in 2018. See 1.415(c)-1(b)(6)(i)(B).

Yes, Revenue Ruling 72-509. I'm not aware that this has ever been made obsolete, although it is just plain stupid... I will say that this "rule" is flung down and trampled upon quite frequently in the real world...

Yeah, this was an issue in "ancient times." Revenue Ruling 81-114 officially recognized this, and referred to Dejay Stores, Inc. v. Ryan, and Tallman Tool & Machine Corp. v. Commissioner. Not a requirement for a VERY long time. Prior to 81-114, it was an issue under Revenue Ruling 57-419. No worries! It doesn't HURT to contribute a nominal amount, but seems pointless and unnecessary to me...you can refer the actuary to the citations, but if you need to keep 'em on your side, certainly ok to contribute if they insist.

I've never seen a fee this high. If the maximum participant loan allowed by the plan is $5,000 or something like that, then maybe ok.

Thanks all. Now, suppose he doesn't repay the loan. Can he still take the full 15 years to repay it? Or must it be renegotiated for a 5 year period? I've seen different opinions on this - personally, I don't think the Plan Administrator has a legal duty to follow the results of the loan, as long as it was properly documented and granted as a legitimate home loan. However, the EOB indicates that "best practices" would require a Plan Administrator follow-up, and the loan should be "recalled" or restructured for 5 years. This is in line with Qdrophile's comments. I don't think that happens much in real life, however.

What kind of fee? Do you mean something like a TPA or recordkeeper fee of $75 to originate the loan?

This happens sometimes. Let's assume the individual promptly repays the loan amount, plus interest for the few days he had the funds. Now 2 months later, set to buy a house again. Would you treat the first loan as "never happened" for purposes of the subsequent loan limits, or would you treat it as part of the highest outstanding balance in the last 12 months? I lean toward to former, as the latter seems to produce a truly unfair result, but one could argue that the latter is more technically correct. Opinions?

Many thanks!!!

Thanks ESOP. Last question: To put a number on this to see if I'm understanding properly - suppose the SAR provides that I will receive a cash payment at the end of the year, based on any appreciation in stock price for that year. There are 100 total shares, all owned by the ESOP. And for sake of simplicity, all shares have been allocated. No family members, etc. Stock price as of 1/1/2018 is $10.00 per share. My ESOP account has 9 shares. Stock price as of 12/31/2018 rises to $20.00 per share. My 9 shares entitle me to a cash payment of $90.00. So $90.00/current stock price of $20.00 = 4.5, so my "synthetic equity" is 4.5 shares, giving me a total of 13.5 shares. Is the calculation then 13.5/100 = 13.5% so I am now a "disqualified person" or is it 13.5/(100 + 4.5) = 12.9% (still a disqualified person, but sometimes the math might work out so that I'm not)?