Tom Poje

I think one problem with the example is the assumptions drawn from it. Clearly I think you would agree that it requires a 12 month period (as oppossed to pro-rata the hours) and I think clearly that the new vesting period has to begin before the old one ends. then the example comes in and seems to befuddle things... but there is nothing in the example that says that the change was due to a short plan year. all it says is that the plan had been using the calendar year period to calc vesting and now it is switching to a different period -(I guess I have seen some fiscal year plans use calendar year comp and nours) so maybe that is the situation the example is referring to. I would the example Bill indicated under 'previous' knew makes perfect sense with the regs - in year '2' the vesting computation period began before the period in '1' ended. look at other examples such as eligibility - a plan that has a 2 year wait but switches from anniverasry date to plan year arrives at the same results. e.g. a person hired 9/1 gets 1 year of elig service on 9/1 and then another on 12/31

punt. I don't think it is elementary at all. you just need to know where to look. there is even an example. see [Labor Reg §2530.203-2©] you have to use a 12 month period, so hours get double counted. lest that seems unfair, HCE definition using the same basic concept. always a 12 month period.

we just switched to 12 a month or so ago.

I believe you are correct on all points. There is one and only one ABT and it is indeed the same for 410(b) as for nondiscrim testing. if you undersatnd that much then you are well ahead of the game! very good! my apologies if I incorrectly numered the column in my description, it is hard enough to understand some of this stuff. and yes, employee contributions (after tax) are not included, unless they are roth deferrals. [and dont include catch up contributions either] by the way, attached is my modified version of the overall report. however, it would have to be copied into the relius directory of reports as you can't run it out of custom. thus you would first have to rename the overall report and then copy this one to that folder. the modification is simply to show the total count of NHCEs and HCEs, the NHCE concentration % and the midpoint. since the report shows the ratio % for each HCE this gives an immediate comparison. also the report will show the avg ben % test numbers. I'm simply pulling the fields that show up on another report so I dont think anything can go haywire. besides, I didn't modify anything in the pass/fail columns so nothing is going to change there. [ report version at 12]

if you choose to test 'otherwise excludables' separately, then you have '2 plans' one for those who have met the one year eligibility. there is no test because that plan is safe harbor. then you have a test for the otherwise excludables. it is not safe harbor so testing is required, but unless there is an owner in the group, it would be almost impossible to have an HCE, so that would pass testing. yes, you would also have to test each 'plan' for 410(b), though again the same argument applies - it would be almost impossible to fail. the only thing you have given up is the 'top heavy free' card by testing separately.

if the individual is not self-employed or similar status, then there is NO way I know of you how to defer this late. shoot, if that was true everyone would do it. and just how is it going to show up on the W-2 for the year? now, if there was a valid election made then the emplyer might be on the hook for making it up but that is an EPCRS issue.

Andy- Is that JanetM attacking Blinky??????

If you are printing the 401(a)(4) nondiscrimination summary I could understand your confusion. I never use that that report, I find the info on that report baffling. part of the problem is the use of terms on Relius. In terms of the regs there is 1. coverage, which is 410(b) and 2. nondiscrim, which is 401(a)(4) in Relius both of these are listed under nondiscrim analysis, though you could have a plain vanilla profit sharing that you don't care about nondiscrim and are only testing for coverage, but you find the coverage report/testing results under 'nondiscrim'. all that aside, if you are testing nondiscrim, then the 'overall report' is a good starting point. each hce is listed (e.g. each rate group). on the far right are the pass/fail columns. first coulmn is ratio % - if it says 'pass' then that HCE passes. the last column (for better or worse is titled 410(b) test) will also say 'pass' as a result. the 2nd column is titled 'nondiscrim classification test'. the HCEs ratio % (which shows on this report) must be greater than the midpoint (which unfortunately does not appear on this report unless you have modified the report - it is not that hard to add) it does appear elsewhere, simply not on this report. This may say pass or fail. A 'pass' is only part one. the next column 'avg ben % test' must also say pass. in other words, if columns 2 AND 3 say pass, then coulmn 4 will say pass. column 4 will be the same for everyone since there is only one and only one avg ben % test (which includes all contributions) If column 1 OR 4 say pass, then column 5 will say pass and the HCE passes. all HCE must pass. all that is probably confusing unless you are looking at a copy of the report and then it will should make a little more sense.

your statements sound correct across the board. 10 points. you may now continue the rest of the examination.

ok, first some clarification: 1. a plan's allocation formula can use permitted disparity. you simply follow the terms of the document. 2. for nondiscrim testing, a plan is permitted to 'impute disparity' which looks very similar to permitted disparity, the concept is basically the same. to impute disparty is a testing assumption. it is not document driven. it is purely optional. you don't have to be consistent from year to year. now, as for testing if you need the avg ben % test, all contributions - deferrals, qmac and profit sharing are used. only for that test. repeat: only for that test. any other testing (rate group testing) only uses non-elective contributions. there is not requirement that you use the avg ben % test. if you can pass the 70% ratio % test (for each HCE rate group) then you do not needed it.

the IRS personal I have sat in with have expressed some concern about the issues of 415 limits and catch ups. for instance, in your example it sounds like the deferral was deposited in the plan before pye, and then the profit sharing was determined. lets suppose for example you were to run the adp test before the profit sharing was deposited. you would use the 15500 in testing. [and suppose your plan failed and you had refunds that were made] now you allocate the profit sharing (which could be done as late as sometime in Sept in a calender year plan) if you allocate as you did creating a 415 limit issue, then treated more deferral as catch up, you have now run a bad ADP test and have really botched things up big time. ugh, try and fix that mess! I can understand the IRS reasoning. This would be different if there was a second plan that was money purchase or the dreading target benefit in which there was a required contribution and the 415 was limit was reached. In your example it is profit sharing and discretionary and so the IRS 'frowns' upon such practice. can it be done? well, without specific guidance you can probably get away with it, I really doubt that was the intent of things.

you might want to read the following dealing with EACAs and limiting participation, which appeared in yesterday's newsletter: http://www.relius.net/News/TechnicalUpdates.aspx?ID=388 if you are not receiving the daily newsletter, then goto http://benefitslink.com/newsletter/ it costs nothing and there is too much info out there that bears reading

there are of course a variety of ways to generate a report. you could tell the nondiscrim to test on an allocation basis to see who gets 3% and who gets more. attached is a crystal report that will split out the SHNEC from other ps contributions with a big caveat of course. I identify all my SHNEC accouts beginning with account number 800. If you have a partial understanding of crystal you could easily modify the 2 fields indicating the account number. you cant miss them in this report, though supressed they are the fields in super large size compared to everything else

Instead of being confused, read Notice 2000-3, in particular Q-10 http://benefitslink.com/IRS/notice2000-3.html (by the way, if a plan is operated this way, the 'top-heavy free' option does not apply - you have to provide if plan is indeed top heavy)

here is the cite, just for you 1.410(b) dash six b two

This is how the regs and the all important preamble describe it. Even though these elective contributions are not distributed, they are still excess contributions, and accordingly, the related matching contributions made with respect to excess contributions may be forfeited [1.414(v)-1(d)(2)(iii)] but… If the plan applies a single matching formula to deferrals whether or not they are catch-up, the matching formula is not treated as a separate BRF…but the match is still included in testing. [preamble to the regs on catch-up – see also 1.414(v)-1(d)(4)]

see appendix A .05(2)(f) looks to me like it says you can't bring the missed person into the plan until after you have run and made corrections for ADP or ACP failures. thus you dont rerun the test with the missed ee (at least that is how I read it)

my logic and reasoning (which has been wrong plenty of times) would be as follows: 1.414(s)-(1)(d)(3)(iii) the employees taken into account are the same employees taken into account in satisfying the requirements of the applicable provision for the determination period. so, if my a(4) test consisted of statutory included only, I would say you include only those same people in determining the 414s test

if the ACP test is already close, then the after tax feature also requires you include in testing those ees who might have been previously excluded (e.g. if the plan had a last day or hours requirement for match), thus adding more 0's to the test. but the logic of it (instead of a Roth) baffles me. lets see. I put in $10000 in after tax. at retirement it has doubled to $20000. I have to pay taxes on 10000 in earnings. But with the Roth, I pay no taxes on the earnings. hmmm. I am living in Florida and can probably get my hands on some swamp land if they want!

1.401(k)-2(b)(2)(vi)(A) if I am reading the proposed amendments correctly see page 24 of your very own copy found here http://www.psca.org/pdfs/TREASprop-autoenroll.pdf

one of the provision under the regs is that otherwise excludable option applies only to NHCEs. if you test that way, then it sounds like you have the following: statutory includable - only HCEs, no NHCEs to compare so you pass otherwise excludable - only NHCE - so you pass because there are no HCEs.

actually the immediate annuity factor falls imbetween (at least at 8.5% interest) if I said otherwise, I apologize. the tables at either end were UP84 and 1983IAF. by the way, the regs list which tables are allowed to be used 1.401(a)(4)-12 definitions: standard mortality table so you cant use just any table. the last sentance says: the applicable mortality table under section 417(e)(3)(A)(ii)(I) is also a standard table. otherwise you couldn't use the new table that gets released every few years for those DB folks to pay lump sums.

clever Dave! I've seen it recomended that you write it out as well davebakeratbenefitslinkdotcom j4fkbc: what, me intentionally post a rhyme as an answer?

hmmm, so now we are "benefit slink"? bad job Walt, bad job.

In this case my friend You have nothing to fear One thing is certain And the regs make it clear With no NHCEs involved in the test The HCEs pass Its simply the best If its doubt in your mind that you have nothing to do just check out the regs 1.401(k)-2(a)(B)(ii)