Penpack

I don't think there would be anything precluding for separate plans. I think however, the plan sponsor was told because they were a controlled group, they could operate the plan this way. I do believe they were told this by the business owner of the TPA firm where I used to work. I never worked on this plan but because of some reorganization done and realignment of the work, I was assigned this plan. I read and re-read the document, looking for something that would provide guidance. I documented what I thought was wrong; could not give my blessing on the cross-testing and turned it over to management. This client/sponsor reads everything closely and tries to do everything by the book. I recently quit this job; one reason due to reorganization and unfair realignment and in the back of mind, that this is a second-rate TPA firm. After I documented and discussed what I thought was wrong with this document, the owner of the TPA firm says, I think it is okay. Strange but true, firm had 6 employees, and two of us quit during February. Glad I'm out of there.

The employer is part of a controlled group. The primary plan sponsor uses a fiscal year ending 9/30 and the plan year is the same. The adopting employer has a calendar year and is using the plan as a calendar year plan. This has been going on for years. The plan is also cross tested. The plan's definition of compensation says "use the plan sponsors fiscal year" which might make using 12/31 compensation for allocation purposes for the adopting employer okay. There is no definition for testing compensation. The fiscal year plan has dual entry dates; the adopting employer (who has a calendar year fiscal year) has dual entry dates of 1/1 and 7/1. None of this is stated in the document, only the entry dates for the fiscal year plan. The plan uses entry date compensation. I think this plan document and plan has problems if they were ever examined by the IRS. Anyone ever had something like this? And am I really off-base? And something like this is okay?

This plan has what I think is another problem. It is a controlled group (2 entities) and the plan is a fiscal year and the main plan sponsor operates their business on this same fiscal year. The other entity participating in the plan is on a corporate calendar year and uses calendar year entry dates and calendar year compensation. Kind of like operating two plans within one plan. The document does not specify special entry dates other than first day of first plan year and 6 months after the date on which he satisfied such requirements and does not specify any of this operationally This plan is not top heavy and the company is not really trying to majorly benefit its HCEs. Makes this a shame because this plan is mainly for the employees. I think this type of plan design could work if the plan document is correct. Anyone ever have any plan design like this? And this is a small plan, employee wise.

Does the gateway apply if I am not testing using EBARS?

Have a plan, each employee in their own group ... NHCE employees receiving from 3% of comp to 15% of comp (only one employee receiving 15%) There are 5 HCES and only two are receiving contributions ... one at 3% and one at 15%. Can I bypass the gateway test by testing the average of the contribution percentages? Do I have to use broadly available allocation rates? If using broadly, can I count the HCEs that are getting nothing? For example, if I average the HCE group (including HCEs) getting nothing, it is a 3.60% average. If I average the NHCE group (and also include those getting nothing because they were not employed on the last day of the plan year), the average is 3.92%. From what I read about broadly available allocation rates you count only those getting a contribution, my HCE group would be 50% (only 1 of the 2 who are getting a contribution is getting 15%), but for my NHCE group is 1 out of 22 getting the 15% for 4.55%. My NHCE concentration percentage is 84.85% and the midpoint is 27%; I believe this would definitely fail the broadly available allocation rate. They would pass cross testing; but fail the gateway because of the group of employees getting only 3%. I need to tell them either to lower the one HCE to 9% or to raise the 3% contributions to 5%. Or let them know it can pass testing another way. Any help greatly appreciated and I hope I have adequately explained everything.