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It is advantageous if the minimum contribution for those passing is at say 6%. Only those that worked 1000 hours, last day would get the 6% and everyone that didn't meet the allocation requirements would only get the gateway minimum.

Nope, but it would pass at 4.5534%.

No, I would not include them in the beginning participant count.

You will also have to give the NHCE the gateway minimum.

I agree.

I believe that is what they are wanting to do. They are going to have several NHCEs to start off with that would be 100% vested so I am not as concerned about discrimination in regards to the start of the plan. I am more worried about them amending out the language and hiring on employees from the old firm in the future. The document is Accudraft. My next plan is to use the volume submitter and modify language to make everyone employed at the effective date 100% vested and thereafter everyone who is subsequently hired would follow a vesting schedule. I am thinking this would work.

I have a situation where six people that all quit the same company and started their own. They also brought two NHCEs over with them. They are ready to start a retirement plan and they wish to make everyone 100% vested as of the effective date of the document. My problem is that my prototype will not accomodate this. Now, if I design the plan to count all service with the company they were all formerly employed by, I could get by this. My question is would I have any discrimination problems with this design. Also, I am going to assume they will want to amend the plan in the near future to eliminate prospectively the provision in regards to the service with the prior employer. All thoughts and comments are appreciated.

Is income required in order to make a contribution to a ROTH IRA?

Yes there would be a refund of all of the deferrals and no you would not include him in the ADP test.

My answer does not change from my previous posts on this thread.

Let's say your client wants to max out and his comp for the year is $100,000. His 404(a) limit is $25,000. Deferrals are no longer counted in the 404(a) limit so he can end up putting a total of $39,000 for 2005. If there is no 401(k) feature then you are limited to the 404(a) limit of $25,000.

It depends on what his objectives are. If he wants to contribute the maximum and his compensation is around $160,000 or less then yes, you would want the 401(k) feature.

I believe Relius has the same thing but I have not used it

Tom, your post makes me raise a question about Relius regarding the QNECs/QMACs. I am trying to allocate a bottoms-up QNEC for the ACP test and I cannot get Relius to show it in the ACP test at all. I am waiting for Corbel to provide me with an answer but that has been over a day now. Are you saying Relius won't accomplish what I am trying to do with the QNEC?

I believe this feature only works with the summary of accounts reports and the certificates.

You can use the Report Grouping Code function to accomplish this. Go into plan specs/account definitions and click on the source tab. Open an employer source and you will see a field called Report Grouping Code. Enter your title for the source and this should solve your problem.

Yes, this is permissible.

I do realize you can do that but this is not two separate plans. This is one plan. I did not ask the attorney for their rationale because I only cared what it was if they disagreed with me. My rationale is as follows. 410(b)-5(d)(3) is titled "Plans and plan years taken into account". I interpret that as meaning what plan years are tested when you have multiple plans. Now if it was just titled "Plan years taken into account" I would feel differently. The regs in this section also refer to multiple plans a number of times. I do not see any reference to a short plan year whatsoever. Anyway, that is my rationale.

Nope, you got it. That was what I was asking. My software (Relius) is pulling in the prior plan year and they said that was the way it was supposed to work. I thought that was wrong and so I posed the question and did some more research to make sure I was right.

Well, I spoke with two ERISA attorneys and they both said that the plan years would not be aggregated for purposes of the AB%T.

I think I figured out the answer to my question. 410(b)-5(d)(3)(ii) deals with aggregating two or more plans, not the same plan like I initially thought. Someone let me know if I am misinterpreting.

I am running the general test for a short plan year 7/1 -12/31. Under 410(b)-5(d)(3)(ii) it states: An employee’s employee benefit percentage is determined on the basis of plan years ending with or within the same calendar year. These plan years are referred to in this section as the relevant plan years or, in the aggregate, as the testing period. Now in 401(a)(4)-1©(3) it states: The requirements of paragraph (b) of this section are generally applied on the basis of the plan year and on the basis of the terms of the plan in effect during the plan year. Thus, unless otherwise provided, the compensation, contributions, benefit accruals, and other items used to apply these requirements must be determined with respect to the plan year being tested. I am a bit confused as to how to run the AB%T. Do I include both plan years that end in 2004 or not?

I don't know any cites but that is correct. You will take the amount from line 15a from the K-1 and reduce it by unreimbursed partnership expenses from schedule E and section 179 depreciation (located on K-1 also).

Is there any reason why a not for profit organization that has only one employee cannot setup a premium only cafeteria plan?

Yes, but what and who determines what is a professional credential?