Tom Poje

my understanding of your situation is the following: Regs say if you get a nonelective, any nonelective you are eligible for the gateway. the plan in question has the following: 1. non-elective (no eligiblity becasue its safe harbor) 2. non elective - 500 hour rule / last day since the ee in question received #1, then they are eligible for the gateway. furthermore, when testing, you use the minimum eligiblity requirements, so the individual is also included in the rate group test as well.

I asked this same question to the IRS personal that show up at the ASPPA conference. After a sort of an initial puzzled look, they verified the language does in deed say 'at least 3%' and they indicated as long as you have the proper document language you could indeed give more than 3%. In other words, if your document says you are going to provide 3%, then ypu have to follow the terms of the document and only give 3%, not more. I still haven't figured an exact situation in which providing more helps or improves testing, but there doesn't appear to be anything to stop a compnay from being more generous than it needs to be.

that would be my understanding from reading the code (and what I have read elsewhere) of course, what I have read elsewhere may prejudice my reading of the code!

the Code says its the increase of the calendar quarter (for any given year) over the 'base period' (which was 2001) [as oppossed to 'the preceding plan year quarter'. I take that to mean you could never drop below the base period value (e.g. 40,000). since the average base period value for the CPI was around 170, the current values still represent an increase

Here is a tidbit you may have not realized, but the possibility does exist that the plan limits could actually drop next year. (I know, that quite a ways off, but it is food for thought) The CPI factors have dropped so much the last few months it is a real possibility. The 2009 limits were based on the following factors: July 219.964 Aug 219.086 Sept 218.783 The most recent limits are well below those: Oct 216.573 Nov 212.425

I am a bit puzzled, so probably didn't understand something. The regs say you can have immediate eligibility and have a 1 year wait for match. (thus the ability to test otherwise excludables seperately) so if someone enters mid year, and the match is done on a payroll basis, I thought that still fell within the boundaries of satisfying the safe harbor (e.g. match cam be from date of entry) even though they only receive a match for 1/2 the year

maybe.

yes. oh, you probably mean "Where can I find the tables" 1.401(l)-3(e)(3)

Bah. I must find a way to keep Christmas from coming .. . . . . . . . . . . . . .I have too much work to do before then so in the meantime, enjoy a bit of winter condolences with the following: http://dalesdesigns.net/winter_poem.htm

I think the answer is clear as mud. a notice given 30 days before hand is deemed to be 'reasonable'. if you go less than 30 days is that ok? I think the iRS has hinted that the answer is possibly 'yes' but certainly not a good habit to get into. And a 3% SHNEC generally is not viewed upon effecting an individuals decision to defer (certainly not to the degree a SHMAC would be) so, can you amend to eliminate the SHNEC (or at least go "Maybe") as long as you provide the notice before year end... well, I'd lean toward saying cautiously it could probably be done. (As long as you don't quote me on that!) In addition, at one ASPPA conference the IRS indicated that you could probably follow the same guidelines as for eliminating a SHMAC, so the possibility seems to exist. but then again, those are comments made that do't necessary represent an actual stance of the department.

"Second, I have it ingrained in my head that "an employee" must receive a gateway allocation if he/she benefits under the plan, unless he/she is separately tested as an otherwise excludable employee" no, this is not true. an employee must only receive a gateway if they receive a nonelective contribution. now, in this case, since there is a 401k, and the plan is top heavy, the individual must receive the top heavy. since a top heavy is a nonelective contribution, then the person must receive the gateway. if the document does not contain gateway language then you can only give the person additional contributions through a corrective amendment. yes, the person is going to show up in the test.

in this case, you shouldn't have a problem. If you had said you need 501 in 6 months, conceivable that individual could work 500 hours in 6 months and another 500 in the next 6 months. he would fail eligibility, but since he worked 1000 hours in a 12 month period he would have to come in. Again, you don't have that situation, so you would be ok.

I'm not sure there is a requirement for a plan to have gateway language. Now, without it you can't simply bump someone up to the required amount, so you would probably want the language in there. For example, suppose the DB/DC combo is top heavy. Then someone who is active with less than 1000 hours gets the top heavy min of 5%. if the gateway was 7.5%, then without gateway language you would have to put in a corrective amendment to increase the individual to 7.5%.

Assuming of course that top heavy (if needed) is provided in the money purchase plan.

are you asking "what would I do", or "could you get away with it"? I personally wouldn't do it. would the IRS press the issue? the question has been raised in a slightly different vein to the IRS "If a plan has a 1 year wait could it be amended during the year to have no wait and still be safe harbor" this was in regards to the SHNEC, so it really has no effect on someone deferring. the IRS hemmed and hawed on the answer, so its hard to say. you would think if you are only making things better it would be ok, but they haven't addressed the issue. Again, in your particular example, the plan already had a Basic match, so does the discretionary match effect someones deferral level? - and just how would the IRS view it? arguably, under the notice requirements (1.401(k)-3(d)(ii) A. you describe the safe harbor contributions B. other contributions (this can simply say see the SPD) since the descretionary match was described under B (most likely) then that would seem to preclude changing things. but if your notice was vague enough or general enough I suppose you could get away with it so to speak.

that's really me. this time of year I take off my mask so people can see what I really look like.

Kevin: you make a good point. There are (or maybe I should say) there is at least one IRS agent who feels that the discretionary match would ruin the top-heavy exemption. I don't see that at all, and I know Craig Hoffman disagreed with the opinion as well. Revenue Ruling 2004-13 (the one dealing with the question if the top-heavy was a year by year basis) simply says Section 401(m)(11) provides that a defined contribution plan is treated as satisfying the ACP test for matching contributions if the plan meets the requirements of § 401(k)(12) and in addition meets certain limitations on the amount and rate of matching contributions available under the plan

and everyone blames the government for the economy problems. hmmm. makes you wonder

that would be my understanding as well, if you have a required match in addition to a safe harbor match then as long as you limit to 6% deferred there is no requirement to limit to 4% of comp. Though, if a match is really that generous then I don't see the reason for a safe harbor in the first place. How can such a plan fail testing unless the NHCEs are really that dumb. good grief, can you imagine passing up the opportunity to receive that much match?

anyone who receives a nonelective contribution (and a SNHEC is a nonelective) is entitled to the gateway. thus, the individual who terminated must be provided the gateway, otherwise you can't cross-test. now, the document can certainly say a SHNEC of at least 3%, and thus there is nothing to stop you from providing a greater % to all participants. hopefully, the document also contains gateway language, which should say you would bump up anyone who needs to be bumped up. then you would have to have 'extra' 100% vested amounts. if the document does not contain gateway language, then you could put in a corrective amendment to provide the terminee the required amount (assuming you are still within 9 1/2 months of plan year end.

well, Tom is out. hopefully the mean nasty Grinch can lead you astray. according to my notes, er at least the Code: Top Heavy (416(g)(4)) The term ‘top-heavy plan’ shall not include a plan which consists solely of – (i) a cash or deferred arrangement which meets the requirements of section 401(k)(12), [ADP safe harbor] and (ii) matching contributions with respect to which the requirements of section 401(m)(11) [ACP safe harbor] are met. if the discretionary match meets the conditions of a safe harbor match, then the plan gets a top heavy free ride (assuming there are not an additional profit sharing or forfeitures of course) ...... I would agree that a 66.6% match on the first 6% deferred is the ideal match because that translates to a max of 4% of comp, thus you meet all the requirements for the safe harbor discretionary match. The IRS has never addressed the issue of eliminating the discretionary matching conditions during the year, so technically that could be a sticking point. but since the plan already provides a SHMAC for the ADP I doubt it would be a problem. If the plan had provided a SHNEC instead then I might be a little more hesitant. someone might not have deferred if the match had conditions attached. Arguably, someone might have only deferred 5% instead of 6% with the Basic match in place, but since the discretionary match is discretionary there is no guarantee that any additional match would be made, so I don't see how that should really effect how much someone defers. ........ Max (the dog) says Hi to all Now, as for my boss... Then my boss grumbled with his fingers nervously drumming I must find some way to keep Christmas from coming. For tomorrow he knew those folks he employs Would wake bright and early and rush for their toys They’ll take the day off, they won’t come to work They’ll expect to get paid, what do they take me for – a jerk?

also, for purposes of determining how much loan is available, even though the defaulted is no longer considered for other purposes, the defaulted loan continues to accrue interest, so even if a plan allows more than one loan, the individual is 'penalized' so to speak

my copy of the preamble to the final regs says that ...for example, elective contributions under a qualified CODA are taken into account for purposes of determining whether a participant is a nonvested participant for purposes of section 411(a)(6)(D)(iii) [which is the section dealing with break in service rules] see page 18, section D

I do graciously give thanks to God for all those who have provided so much useful information. It does make a difference to me, I can never stop learning, and that knowledge does help. And a special thanks for all the extra wit and humor along the way. I know I am truly blessed and so thankful for all those I can consider friends. May your Thanksgiving holidays be truly blessed.

O GR8. next U tell me eye have 2 provide notice n text message 4mat.