Tom Poje

first - good job and congrats, especially that you could even follow my notes and translate them! It can be quite a complicated subject now as for rate bands, I suppose setting the HCE at the midpoint is a good starting point. If the HCE ended up a little above the midpoint, its probably ok, but I certainly wouldn't go with the HCE at the top and bring NHCEs up. (fair is fair - that could be problematic if the plan ever was audited) the 5% is only a maximim range. there is no reason you can't use something else. so with more than 1 hce you could have a rate band between 4.8 and 5.2 and another between 5.21 and 5.3 - as long as the rate band don't overlap. the range can be different from one rate band to another. (e.g. you could use 5% for one band and 1% for another.) or you could do like you said with 2 HCEs and combine them. I simply frown upon having one HCE at the top. see 1.401(a)(4)-3(d)(3)(ii) which says "...accrual rate may not be grouped if the accrual rates of HCEs within the range generally are significantly higher than the accrual rates of the NHCEs within the range." prior to Relius 13 I could only enter one rate band, with Relius 13 I can enter more than one. either they fixed something or we had a glitch on our system.

before trying to explain the rate group report, lets see what you have 126 Total NHCE 32 total hces 158 total ees 126/158 = 79.747% NHCE concentratio % always round down, so you have 79% if you calculate / look up on table / whatever translates to a mid point of 30.75. in the rate group you have 1/126 for the NHCEs and 1/32 for the HCEs dividing these two numbers = 25.397 which is less than 30.75, so fails. the good news is that you only need 1 more NHCE to pass nondiscrim classification testing. since you already pass the avg ben % test, then everything works if you get just one more NHCE. I am going to assume when you said HCE = 24.705 e bar, you mean for the avg ben % test. those e bars are used for that test only and not the nondiscrim test under 401(a)(4). the problem with the rate group report is it will only show you ees who are in the rate group and not someone who is real close. now, you said the HCE was at 16.196. and then when you rate banded it shows him at 14.654 here is what has taken place: the system has determined a midpoint of 15.425. 5% on either side is .771 so 15.425 + .771 = 16.196 Hi rate and 15.425 - .771 = 14.654 lo rate. what the most important question is: what is the E-Bar for the NHCE next in line . who is the closest to the HCE rate of 16.196? lets suppose I set the HCE as the midpoint = 16.196. 5% either side is .8089, so this gives a Hi rate of 16.196 + .8090 = 17.006 which would include the NHCE at 16.914. the lo rate would be 16.196 - .8090 = 15.387. so if you have an NHCE close to that you are probabaly ok. (and can generate the report to indicate so. there are some other possible testing assumption that might work. If the HCE was born in the 2nd half of the year then using age last will help if the NHCE was born in the first half of the year.

I can try firing the question past the IRS agents just to see what they say when I see then in a couple weeks for the Q and A review. ....... my nonsensical logic operates something like this: Person A in reality consists of Person A (commission) and Person A (noncommission) the regs require me to aggregate so normally I only think of this guy as Person A. however, the plan excludes commission employees. Therefore I am left with Person A (noncommission) and this particular year he has no comp. In the past the IRS has said exclude such people from the test (nothing in the regs, simply that for all purposes the person was ineligible to defer so don't include him. but that is my illogic. probably not even worth 2 cents.

as an explanation I will start with an example. for rate banding the regs say you can use a 5% difference above and below a midpoint. so lets suppose my midpoint is 10%. 5% either side of that is .5, so anyone between 9.5 (lo rate) and 10.5 (hi rate) is treated as being '10'. this is greta for getting other people into the rate group. the problem (?) with Relius is that it will starte with the HCE at the hi rate and back into the midpoint and the lo rate. the regs are pretty specific that rate banding is fine as long as it doesn't overly favors the HCEs. well, I don't remember the exact language, but something to that effect. In other words, if you put the HCE at the midpoint and bring NHCEs up to him, and NHCEs down to that rate, then that would be ok. but to start with the HCE at the HI rate would not seem to pass the 'smell test'. in other words lets say you had NHCE 1 = 10.47 HCE = 10 and NHCE2 9.75. you could group around a midpoint of 10. you are bringing an NHCE up and bringing an NHCE down. but if you had HCE = 10.47 NHCE1 = 10 and NHCE2 9.75 you are now bringing an NHCE up and an HCE down, which does not seem to be in the spirit or intent of how the regs are worded. so I personally don't recomend using the Relius default. since you can set the rate bands (rather than using the default) you might be able to accomplish what you desire anyway and still meet the regulation guidelines. It is also possible that using a pre interest rate of 8.5% and post rate of 7.5% will pass if you are that close. or if you didn't use it, a mortality table of 1983 IAF

I think I ended up at 75% on the ESPN site - but at work I can't check. (but then I'm originally from Michigan so its within such individuals rites to be a 'Chokerine' at picking. I suppose that is behind you, but what the heck. onward and upward. Are you offering any guarantees for 'eliminator', besides using up New England the first week in pro-football?

when the self correction first came about, the idea was to "put the plan in a position it would have been if the error had not occurred" therefore, logically, it made sense the person wasn't eligible to defer, so forfeit and make the person whole outside the plan. things evolved over a few years, and the IRS said the preferred method would be to retroactively amend the plan to let these people be eligible, because in addition the getting the plan in the proper position, the idea is also to 'leave the $ in the plan if possible'. I find the idea that "I don't want to apply for a determination letter" somewhat of a slim reason for not correcting under the suggested method. But maybe that is just me. could you get by forfeiting? I haven't heard. if you do so, you simply have guarantee that the IRS will approve of what you did if the plan gets audited. EPCRS is not meant to offer every single possible 'how to correct' method - that would seem to be impossible to do - so there is some leeway in how you handle things as far as self correction goes, as long as you follow similar suggestions under the ePCRS program.

If plans are not aggregated then I would agree probably no BRF in regards to the after tax. I express a concern about using test results from 2 years ago in light of the fact it is indicated the plan is failing in 2007. the option to use 'prior year results' (at least as far as I understand it) is if there are not significant changes. I thought this option was primarily for situations in which you have 'a gazillion participants' and if it passed in prior years the IRS is giving a little leeway and saying don't bother testing because it doesn't really matter if you have some minor changes... a plan with a gazillion people that passed coverage at 82% is not going tochange much unless you have a big shift. ok, I took the trouble to look in the ERSIA outline book under 3 year cycle testing, and it basically says the same thing - if "employer reasonably concludes that there has not been any significant change affecting the outcome of the coverage test performed in prior year"

I am a bit confused, you say there are coverage issues but that the ADP and ACP are tested separately. That implies for coverage that the plans are tested separately, in which case it sounds like there are not really coverage issues since each plan can pass on its own. as for after-tax, it is not really a coverage issue, though it is a BRF issue 1.401(a)(4)-4(e)(3)(iii)(F)

this is another of my 'useless?' spreadsheets that may or may not perform the calculation you desire. there are no instructions, and I've tweaked the original version to do some other things, that probably only a nut case like myself would want - well, like calculating an estimated % to reach a desired contribution goal. but then since I know how I wrote the formula I know that amount is only an estimate so that it will take a couple of passes to arrive at the actual desired results.

Laura: Your comment about the QACA is interesting because the very question was raised at the ASPPA conference a few years ago, and the response was 'effective availability would be questioned' I believe somewhere buried in the Nondiscrim section of Sal's book (chapter 9) it notes that 'utilization' is not considered as part of the current availability test, but low utilization would be considered for effective availability. Must be nice to have one or two NHCE deferring to help pass ADP/ACP test - enough to offset the other NHCEs who do nothing

while true, anyone technically could defer 4%, so current availability seems to pass. the more important issue is 'effective availability' and I believe that is what you are really asking. there is no numerical test, but rather its based on facts and circumstances, but I think your option 2 is probably a reasonable approach. (and see 1.410(b)-4©(3) for other facts and circumstance items. and before someone says why bother, everyone has that option to defer 4%. ok, what if the plan provided the match but only to those deferring 10%? (besides being guaranteed of failing the ADP/ACP test, almost no NHCE could take advantage of such a match. consider also the safe harbor 401(k) rules. you can't have a match that increases the more one defers. so its obvious, at least to this individual, that the IRS has some concerns as to whether a formula might be out of someone's effective availability. The problem is that they have never told us just how much is reasonable. that's my 2 cents worth. is that enough for the match?

while true all are benefiting for Coverage, your question implies people will benefit at different rates for the non-elective portion - which means nondiscrim testing, possible gateway issues.

I can't speak for other document providers. we are using Corbel's but I assume most if not all will have similar language. they have an amendment for the final 415 regs. section 2.1 is labeled 'default provisions' - unless the employer elects otherwise in section 2.2 the following defaults shall apply blah, blah blah just before section 2.1 is a note: The ER needs to complete the questions in Section 2.2 in order to override the default provisions set forth below. If the Plan will use the default provisions, these questions should be skipped. buried deeper in the amendment are things like 3.7 Excess annual additions ....handle in accordance with EPCRS (that is a real paraphrase) so, I'd say you want (or need) the amendment. you end up getting the defaults if you do nothing, but you also get all the other language you probably want.

I survived the hurricane Fay. well, ok, if you mean leaving work early Thursday to avoid the storm waking up Friday morning to no power and a back porch filling up with water surviving. a mess everywhere, and that of course is minor compared to the rest of the state. I suppose the good news will be that 'us folks' will get to file 5500 later tahn normal, etc. as to your question, I agree there is a mysterious animal out there known as an ACA. given the fact if you follow certain conditions you can be an EACA (gad why wouldn't you want to just to get the label "Eligible" attached to your plan. Does that imply an ACA is 'not eligible'? maybe like EPCRS and self correction it means something like you have no guarantee of stuff (including the preemption?) if.... At least that is how I am reading it. Corbel's comparison list has ACA (non-statutory), ACA, EACA and QACA but if you look at the stuff there really isn't a difference between the ACA and EACA for ACA it says "90 day withdrawal - Yes if EACA" and "6 month ADP correction - yes if EACA" but the 90 day withdrawal is optional anyway under ACA, so really the only difference would be the 6 month difference.

allocation to a terminated ee

at this point in the game I am going to beg off your question. A similar one has been submitted for the 2008 IRS Q and A. I get to sit in with the agents in Sept beforehand (fools like me get 'selected' to do stuff like that), so I will have an idea on the answer before the official meeting in Oct at the fall conference.

in case you haven't seen the new document language. (I assume other providers have similar language) the Corbel amendment for the Final 415 regulations is worded as follows: Definition: Administrative delay ("the first few weeks") rule. 415 compensation for a limitation year shall NOT INCLUDE, unless otherwise elected in Section 2.2 of this Amendment, amounts earned but not paid during the limitation year solely because of pay periods and pay dates. However, if elected in Section 2.2 of this Amendment, 415 Compensation for a limitation year shall include amounts earned but not paid during the first few weeks of the next limitation year, the amounts are inlcuded on a uniform and consistent basis with respect to all similarily situated participants, and no compensation is included in more than one limitation year. emphasis mine

I see ESPN has all the games up and running. (I am putting 10 points on Virginia Tech in College Pick em) any takers for bragging rights? the other web site running a 'pick em' is Sports Illustrated http://www.fannation.com/college_pickem/ you have to rank 14 games instead of 10 (They also have a pro pick em as well)

ah yes. aggrevation..errrrr we have people here in the office, so somehow or other I am suppose to get a common time for all to meet together for ASPPA DC-1 class. Much less that task is next to impossible for everyone, Tom is much too lazy, so he is trying to put the DC-1 into powerpoint and it just happens lazy Tom was working on that section of the book. and those ugly terms raise their heads. Mandatory Disaggregation Permissive Aggregation Elective Disaggregation ok, for the avg ben pct test think of it as Mandatory Aggregation, no matter what. just about everything under the sun that could be considered a contribution counts and gets included. (aside from catch-ups and after tax) for your nondiscrim classification, only inlcude amounts for the plans you used for coverage. so if you disaggregated for coverage the cash balance and the profit sharing, then you do the same for the nondiscrim. run 2 tests and only count the amounts from the cash balance when you test the cash balance. But you still count the 'bodies' as zero if you have someone who is in the ps and not the cash balance. you can't get away from that. If my brain recalls correctly, you could even test the plans totaly separately, e.g. an avg ben pct test using cash balance only, and an avg ben pct test using the dc contributions only (including deferral and match). if you do that you must test the dc plan on a dc basis and the db plan on a db basis.

good grief. according to the numbers I have based on the CPI index (The July value was 219.964) the 415 limit will be 49,000 next year. that's quite a jump. of course, I guess the CPI could drop in Aug and Sept, but... you can complain about gas prices and stuff, but it sure is going to increase the limits.

attached is the new and improved version of EPCRS (Self Correction) - Rev Proc 2008-50 They never put the page numbers on the index, so I went through and added those. (just to make clear, the page numbers are only the first 6 pages of the entire rev proc) page 35 is the correction for 415 limit violations. these were formally in the 415 regs and were 'eliminated' from the regs, so to speak. hey, its only 179 pages.

Blinky: Holland's comments don't apply. he never said "no hours (but has a check) not in test" or put another way, I can look at the guy's W-2 for 2007 - and he does indeed have comp. he might not have worked in 2007, but beacuse of when checks are paid, he does indeed have a check and therefore comp. If he fully retired and never worked in 2007, do you ignore his W-2 for the 2007 tax filing because he never worked in 2007? as I said earlier if a plan has immediate eligibility then a person hired on 12/28/06 should be on the 2006 test because they did indeed work in 2006, even though they have no W-2. but you can't tell me they were working for free. It is just that the check doesn't show up until 2007. You want to be consistent.

ASPPA is going to discuss the tax preparers issue in session 40 (supossedly) at the fall conference. hopefully they will cover that topic.

well, under the old rules, 1.401(k)-1©(1)(ii) says (in referring to deferrals) "The contributions are disregarded for applying section 411(a) to other contributions and benefits" now, section 411(a) deals with minimum vesting and in particular 411(a)(7) deals with restoration of benefits. so I believe the conclusion was that you therefore ignore (disregard) having to payback deferrals. however, the new regs 1.401(k)-1© "The contributions are disregarded for applying section 411(a)(2) to other contributions and benefits" so that could throw a monkey wrench into everything. personally I'd lean toward the following: a 401(k) plan consiasts of 3 plans - 401(k), 401(m) and nonelective. therefore, the person forfeited the match because they were 0% vested (e.g. the deemed cash out rule), not because they received a deferral distribution.

here is the challenge (and its free) for bragging rights amongst us : http://games.espn.go.com/frontpage/games there is college pick em - each week 10 games are listed, and you rank the teams (ten through 1) based on your confidence. they already have the first 10 games up and ready to be picked. soon they will have pigskin pick em (with or without the spread (you can do both)) just pick the winners and eliminator - pick one team to win each week. but you can only pick a team once. if there is an interest, it is easy to set up a group just amongst the pension folks to see who is the best (without an actuarial adjustment of course).