Tom Poje

I guess I am still confused. I must pass coverage separately for 401(k) 401(m) nonelective (which it sounds like you have none this year) now, I can pass coverage for 401(k) using either ratio or avg ben test I can pass coverage for 401(m) using either ratio or avg ben test I do not have to use the same method for both tests. now I test 401(k) ratio and for whatever reason it is 68% I test 401(m) ratio and its ratio is at 43% I look at avg ben % test which luckily is at 71%. this is the same no matter whether I look at 401(k), 401(m) or nonelctive because it combines all contributions. so I pass that portion. the 401K ratio was 68% which is greater than any safe harbor possible,so that passes the 401(m) is at 43% - as long as that is greater than the safe harbor % I pass. the safe harbor % is determined based on the NHCE concentration % - most simply look it up on the table. all this of course has nothing to do with nondiscrimination, which is the ADP or ACP test

410(a)(3) says that as a general rule, a year of service means a 12 months period during which an employee has not less than 1000 hours. thus, even if the ee has terminated for awhile, as long as he has completed 1000 hours I dont see how you can exclude him under the general rules as long as he is (re)employed by the entry date. could you get around it by putting in special language to exclude such a person? well, I suppose so, since you can exclude people by name, etc, then that would be possible. would you have to include such people in testing? yes, as includable and not benefitting if you did indeed exclude them since they met the plans eligibility requirements, which means you could fail coverage now, why one would want to put in special language (I assume that would increase the cost of the document and all the other hassles associated with that) is beyond me

well, if you toss out the regs 1.410(b) which deal with coverage, and the ERISA Outline Book which will refernce the regs you do make it difficult. any other resource is also going to reference the regs. I could say the Coverage and Nondiscrimination Answer Book, but same thing thing will happen, your particular question is not addressed 'directly' but would certainly be answer or implied in one of the questions in the book. but since I have to submit some material to the book from time to time, this is how I would answer your your question. and I'll start with a little clarification on cites. if you see a '1-xxx' that is from the Regs if there is no '1-xx' then it is from the Code don't confuse the two, though they are similar and basically cross reference each other. this 1.410(b) is the regs and 410(b) is the code. So, from the code 410(b) Minimum Coverage requirements (1) in general ....the plan meets one of the following (A) .....passes ratio percentage test ...or (B) meets requirements of paragraph (2) (2) Average Benefits Test (A) In general (i) .....basically this says plans ratio % > safe harbor %, and you dont have an unreasonable classification (such as excluding people by name - but this is found in 1.410(b) and you requested that not be used) (ii) ...plan passes Average benefits percentage test I believe 'plan' is also defined in the regs, so you put me in hard place to say that means a 401(k) plan consists of 3 'plans' - 401(k), 401(m) and nonelective, though I suppose I could point to the 5500 instructions which clearly indicates this as well. hope that helps. God bless and have a Merry Christmas!

plus I believe in regards to the match if you are doing things on a payroll basis the match has to be in by the end of the following quarter

I think you are correct, the only way you can run it on Relius would be to reverse the QNEC and simply not include it. as to the other part of your question, I am really not sure. if I understand the regs correctly, In order to cross test, one has to first pass through the gateway. Once all ees who have received some type of nonelctive (including QNECs) have also received enough to satisfy the gateway, then I proceed to cross testing. at that point I run with whatever numbers I have under the rules I have (testing with and without QNEC) this results in an odd situation. an ee who receives a QNEC only gets bumped up to the gateway with an additional nonelctive. now, when I perform my cross test without QNEC the ees contribution is less than the gateway. that seems strange, but I guess once you pass through the gateway you simply test following the rules. I am not sure if you get to a point of running the test 'before the QNEC' and therefore dont have to worry about the gateway. I think the QNEC exists, buried deep in there, and simply isn't used. but I have no clue. no wonder I never recomend giving a QNEC and also having to cross test.

mixing apples and oranges! an individual can receive a maximum of 100% of comp or $42,000. but the plan itself can only deduct 25% of compensation - so unless there are other employees, then you would never reach the 100% individual limit (I suppose you could make 10,000 defer 7500 and put in 2500 profit sharing - that would be 100% of comp, but 25% deductibility). The maximum amount of comp is 210,000 for 2005. deferrals do not count toward the 25% deductibility limit. if one plan is profit sharing only, you can not have a catch up in that plan, since no deferrals are allowed, and catch ups are deferrals that are reclassified.

basically it goes something like this: whether you exclude the son from the plan, or put him in his own rate group at 0%, the effects are the same (if he has completed the plan's eligibility requirements - he counts as a 0. if the plan has deferrals there is a slight difference - if not excluded from the plan he shows as a 0 on the ADP test. if excluded from the plan, he is not on the ADP test, but he shows as includable and not benefiting for coverage, a good thing for 401k coverage test - though that is rarely a problem. assuming such plan is a class plan, if the class is defined as 'owner' he is treated as an owner and would receive whatever % the dad gets, so you have to be careful of document language. if son is a 'short term' employee, then indeed the IRS would probably frown on such a strategy (e.g. plan has immediate eligibility to get him into the plan but he never ever works 1000 hours andd gets a 0 contribution) if plan is top heavy, he would get top heavy unless plan excludes key employees. be careful!

I think if you dont make a discretionary match you would be ok. plus, there is nothing to stop you from making a discretionary match - you would just have to run an ACP test. plus no shifting of deferrals to help pass test. I suppose at that point it works like a cross tested plan - the owners ask you how much they could get in match, and you run the numbers to see what will pass. a cautionary note would be you simply cant say it is discretionary, and this year we will cap at 4% deferred. that would have to be in the document.

well, in one sense it is a pension problem. for example, in a 401k plan would you include such a person in the ADP test? The IRS has expressed an 'opinion' (nothing concrete) at numerous conferences that you would not include such people in testing - they are of course concerned you would use such people to artificially pass testing.

ultimately, yes. to get to the point of having an ACP safe harbor, one has to pass ADP safe harbor. the cite you references words it as follows: "an employee is taken into account ...as an eligible ee...if contributions required...by paragraphs (b) or (c ) [that is ADP safe harbor]

oh wait, not elf but rather el-vis

what you are referring to does not involve a SHNEC (remember, you are not using additional nonelectives to satisfy safe harbor), rather a SHMAC - you can not make an additional discretionary match and treat it as a 'safe harbor' if you impose conditions. you can always make additional matches, but like the nonelective, you will have testing involved. it is in the regs where it says something to the effect 'if you are eligible to defer...' rather than 'if you are eligible for the match

Hey Fredman, I have some work sitting on my desk. Can you handle that for me as well?

hopefully this will work. Hi Stephen! good to hear from you again.

I use the following in my census reports if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='A' then '-age' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='B' then '-service' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='U' then '-hours' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='E' then '-union' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='F' then '-alien' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='G' then '-hourly' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='H' then '-salaried' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='J' then '-commission' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='K' then '-elects out' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='L' then '-elects out' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='M' then '-in other plan' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='N' then '-died' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='T' then '-terminated' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='O' then '-other' else if {PLANEE.CATEGCD}='8' and {PLANEE.INELIGCD}='D' then '-excluded division' (no charge for this one!)

cash or deferral arrangement is made effective no later than 3 months prior to end of year.(unless it was a brand new company that put a plan in immediately). well ok, that is what the new regs say. I did not dig back into 98-52 and whatever, to check on the wording, but the issue is that people need to defer for 3 months, not just length of plan year. you can't defer on checks from months ago.

if I understand your question correctly are you asking can I give both a QNEC and a top heavy? yes, there is no requirement that a QNEC be used toward top heavy. that is simply a 'fringe extra' that a QNEC may do double duty - be used for testing and also count toward top heavy

ah, but my #41 is different (though I actually had his answer as an alternative) 62 I never would have gotten. maybe by process of elimination and with absolutely nothing left to use. 65 I had what I consider a 'legit' answer - though it was to be used elsewhere. I won't say 65 is a stretch, but it is kind of clever.

I did manage to arrive at most of the answers, then contacted the individual for the answers. 2 of his answers were not on the song list! Christmas Time in Texas (he wondered why no one could get that one!), and Round and Round the Christmas Tree. (It is actually Around the Christmas Tree, but makes more sense with the picture) a couple of them I would never have gotten, and at least one or two of them I think my answer is as good as his. Ha. I should charge for the answer grid, but what the heck. Now c'mon. no peeking until you really try to solve them!!!!!!

note: at the end of each chapter in the study guide there is a sheet (or should be a sheet) for submitting comments, etc. granted there are no such sheets for the exam, but either e-mail or use one of the sheets and fax over your comments. they do correct mistakes, and there is a list of known 'errors' available on the ASPPA website http://www.asppa.org/education/ed_study_guide_updates.htm if you run into a similar question on the exam, I would remember what question number it was and after completing the exam, contact ASPPA about the particular question. you are not allowed to remove scrap paper from the testing center.

Take a look at some of the examples in 1.401(a)(4)-8 the general discussion there is avoiding the gateway minimum, but the examples are clear you can put people into groups based on age / service. I would expect if you go to the extreme you indicate, the plan would be top heavy, thus you would have to provide a 3% minimum, which would then become 5% gateway. even if plan is not top heavy, you would have a bunch of zeroes on the test, making it harder to pass testing. remember, we are not talking eligibility - we are talking allocation groups. the people still come into the plan after 1 year. but it sounds like you are saying you want to give the group with < 5 years a 0% contribution. If plan fails ratio percent test, you can't use the avg ben test to pass coverage. odd how you indicate you want to reward long term employees, but if you give zippo to people for 5 years I doubt many would stay anyway so you never retain possible good help. You might as well go with the 5 year cliff vesting, and that would reward people who stayed for 5 years. I would also add that one of the pension bills would require minimum schedules of 2/20 or 3 year cliff.

in other words: look at ees w-2 in 2004. if deferrals are less than 13,000 you are ok. if ee worked somewhere else it is sum of all deferrals. you wont know 2005 w-2 until the end of the month.

So it looks like the guy added a few more puzzles. but then the song list was also enlarged! good luck. I think I solved most of them. ugh. ALL I WANT 4 XMAS IS MY 2 FRONT TEETH ALL THROUGH THE NIGHT ANGELS AND SHEPHERDS ANGELS FROM THE REALMS OF GLORY ANGELS WE HAVE HEARD ON HIGH AROUND THE CHRISTMAS TREE AULD LANG SYNE AVE MARIA AWAY IN THE MANGER BABY IT'S COLD OUTSIDE BABY JUST LIKE YOU BLUE CHAMPAGNE BLUE CHRISTMAS BOOGIE WOOGIE SANTA BORN ON EARTH THE DIVINE CHRIST CHILD CAROL OF THE BELLS CAROL OF THE BIRDS CAROLING WITH THE ELVES CHERRY TREE CAROL CHESTNUTS ROASTING ON AN OPEN FIRE CHILDREN, GO WHERE I SEND YOU CHIPMUNK SONG CHRIST IS BORN IN BETHLEHEM CHRISTMAS BELLS CHRISTMAS CHEER AROUND THE YEAR CHRISTMAS DINNER CHRISTMAS FOR COWBOYS CHRISTMAS IN DIXIE CHRISTMAS IN KILLARNEY CHRISTMAS SHOPPING SONG CHRISTMAS STAR CHRISTMAS TREE CHRISTMAS WALTZES CHRISTMAS WITHOUT YOU COME, THOU LONG-EXPECTED JESUS COOL YULE COVENTRY CAROL CRADLE SONG DANCE OF THE ELVES DANCE OF THE GINGERBREAD MEN DECK THE HALLS DING DONG MERRILY ON HIGH DO THEY KNOW IT'S CHRISTMAS? DO YOU HEAR WHAT I HEAR? FAREWELL TO FRIENDS FELIZ NAVIDAD FIRST NOEL FRIENDLY BEASTS FROSTY THE SNOWMAN FUM, FUM, FUM GENTLE MARY LAID HER CHILD GLOUCESTERSHIRE WASSAIL GO TELL IT ON THE MOUNTAIN GOD REST YE MERRY GENTLEMEN GOOD CHRISTIAN MEN, REJOICE GOOD KING WENCESLAS GRANDMA GOT RUN OVER BY A REINDEER GREATEST GIFT OF ALL GREENSLEEVES HALLELUJAH CHORUS HAPPY HOLIDAYS HARD CANDY CHRISTMAS HARK THE HERALD ANGELS SING HAVE YOURSELF A MERRY LITTLE XMAS HERE COMES SANTA CLAUS HERE WE COME A CAROLING HEY SANTA CLAUS HOLLY AND IVY HOLLY JOLLY CHRISTMAS HOLY NIGHT HOME FOR THE HOLIDAYS HOW A ROSE E'ER BLOOMING HOW GREAT OUR JOY! HURON CAROL I HEARD THE BELLS ON CHRISTMAS DAY I SAW MAMA KISSING SANTA I SAW THREE SHIPS I STILL BELIEVE IN CHRISTMAS I WANT A HIPPOPOTAMUS FOR XMAS IF WE MAKE IT THROUGH DECEMBER I'LL BE HOME FOR CHRISTMAS IN EXCELSIS GLORIA IN THE BLEAK MID WINTER IT CAME UPON A MIDNIGHT CLEAR IT'S BEGINNING 2 LOOK A LOT LIKE XMAS IT'S TIME TO DECORATE AGAIN! JESUS, JESUS, REST YOUR HEAD JINGLE BELL BOOGIE JINGLE BELL ROCK JINGLE BELLS JOLLY OLD SAINT NICHOLAS JOY TO THE WORLD LET ALL MORTAL FLESH KEEP SILENCE LET IT SNOW LET THERE BE PEACE ON EARTH LINUS AND LUCY LITTLE DRUMMER BOY LITTLE SAINT NICK LITTLE TOWN OF BETHLEHEM LORD OF ALL HOPEFULNESS LORD'S PRAYER MAN WITH THE BAG MARY DID YOU KNOW? MARY'S BOY CHILD MASTERS IN THIS HALL MAY THE GOOD LORD BLESS YOU MEET ME UNDER THE MISTLETOE MERRY CHRISTMAS BABY MILK AND COOKIES MISTLETOE AND HOLLY MOST WONDERFUL TIME OF THE YEAR MRS. SANTA'S JIG MUST BE SANTA MY FAVORITE ORNAMENT IS GONE! MY TREE HUNG WITH TEARS NIGHT BEFORE CHRISTMAS NUTCRACKER NUTS ABOUT SANTA NUTTIN' FOR CHRISTMAS O, COME, O COME, EMMANUEL O, CHRISTMAS TREE O, COME ALL YE FAITHFUL O, TANNENBAUM OVER THE RIVER & THROUGH THE WOODS PARADE OF THE WOODEN SOLDIERS PAT-A-PAN PINE CONES AND HOLLY BERRIES PLEASE COME HOME FOR CHRISTMAS PLEASE MR. SANTA CLAUS! PRETTY PAPER REINDEER BOOGIE RING CHRISTMAS BELLS ROCKING ROUND THE XMAS TREE RUDOLPH THE RED NOSED REINDEER RUN RUDOLPH RUN SAINT NICK'S NIP SANTA AND THE KIDS SANTA BABY SANTA CLAUS IS COMING TO TOWN SANTA I'M RIGHT HERE SANTA LOOKED A LOT LIKE DADDY SCARLET RIBBONS SEE AMID THE WINTER'S SNOW SILENT NIGHT SILVER BELLS SKATERS WALTZ SLEEP WELL, LITTLE CHILDREN SLEIGH RIDE STAR CAROL STAR OF THE NORTH SUZY SNOWFLAKE SWINGLE JINGLE THIS IS THAT TIME OF THE YEAR TOYLAND / MARCH OF THE TOYS TWELVE DAYS OF CHRISTMAS UP ON THE HOUSETOP VISIT FROM SAINT NICHOLAS WALKING IN A WINTER WONDERLAND WASSAIL SONG WE THREE KINGS OF ORIENT ARE WE WISH YOU A MERRY CHRISTMAS WERE YOU GOOD THIS YEAR? WHAT CHILD IS THIS? WHERE ARE YOU, CHRISTMAS? WHILE SHEPHERDS WATCHED THEIR FLOCKS WHITE CHRISTMAS YEAR'S END JIG YOU'RE A MEAN ONE, MR. GRINCH!

you have to follow the terms of the document. since there is a last day provision, terms are not entitled to anything extra. hopefully your document contains gateway language, if not, then you cant even bump them up to the gateway. If that happened then you wouldn't even be able to cross test. this means you would have to increase the contribution to the rank and file (or possibly test accrued to date rather than annual) I am assuming you mean HCEs received 3% SHNEC and an additional 10.33% ps (rather than 13.33%) are you talking a 2004 calendar year plan? At this late date it is hard to make corrections/adjustments, etc. since terms < 500 hours received a nonelective contribution you can not exclude them from testing.

elves can be disracting that way, can't they? maybe even if I don't solve them all, I know I drove at least one person batty!