Tom Poje

I'm not convinced of point 4. I understand it to work as follows. To get into Dizzy Land I have to buy a ticket at the gateway. once I buy the ticket, I can choose what time I want to ride the Nondiscrimination Ride of Death, though the owner is going to make me take the ride once with a box of QNEC munchies, and another time without a box QNEC munchies. And I must be able to survive both rides. see alse ERISA Outline Book, page 9.36 (2003 edition) ...although QNECs are used to pass separate discrimination tests, QNECs are still part of the 'plan'. which consists of the employer's nonelective contr. Plan must past a(4) with and without QNEC. If using cross testing then an ee who only receives a QNEC must receive the gateway as well.

personally, I think they messed up using those terms. though they call them QNECs and QMACs 1.401(k)-3(h)(2) says these contributions are not subject to the limitations on QNECs under 1.401(k)-2(a)(6)(ii) so I don't think it changes anything, but if you didn't have the prior Notice to look at, I think you would be baffled. no actually, it doesn't matter. I am baffled anyway.

my guess would follow along these lines. suppose I had two plans, one DB and one DC. the db used full year, the DC used 7/1 comp. If I recall (though I could certainly be wrong) you would calculate separate E-Bars and then aggregate the two. I would think for the average benefits percentage test you would do the same, treat the 401k as one plan and the profit sharing as another and then aggregate.

Dang it Blinky, my brain hurts enough as is. I've a deadline to meet to throw some stuff together for the Coverage Nondiscrim Answer Book and its been real fun changing all the reg cites to match the final regs. Plus you haven't told me who to write at the IRS to correct the math error in one of the examples of the regs!!!! I'd still hold the QNEC gives you permission to hop through the gateway, but then at that point the actual nondiscrim test has to be run twice. Maybe if I had an extra eye I could see through this stuff.

both. The notice is a reflection of what is in the document. I suppose the only exception would be if the plan was doing the 'maybe' SHNEC. in that case the notice would reflect what the plan 'might' do - the SHNEC is not in the document at that time.

I am having trouble with the 'new' match. the example for calculating gap period income (1.401(k)-2(b)(2)(viii) example 4 (ok page 120 if you printed them and your page numbers come out the same as mine) anyway the example says 8,000 multiplied by 3,800 divided by 110,000 is 266.65 I tried my calculator at work, home and the computer as well and I keep getting 276.36. What numbers am I suppose to arrive at? or maybe I am punching the numbers in wrong, how do you arrive at 266.65? If it is wrong, who do we contact? By the way, I also think they left out a section in the preamble - the last section on ACP safe harbor. It was in the proposed regs. And the clarification that was in the proposed regs made it to the final regs - you can not have an allocation condition on the discretionary match. I was working on a possible article on safe harbors when I discovered that apparent omission. For whatever reason, the article wont be used, so heck if anyone wants here it is.

Ashley: suppose you have 1 HCE and 10 NHCEs. all have more than 1 year of service, so there is no testing 'otherwise excludables separately' The SHNEC was 3% and the additional profit sharing was 6% further suppose that 2 of the NHCEs have more than 1 year but less than 2 years of service, and are therefore not eligible for the profit sharing. 2 of 10 NHCE is 20%, which is less than the 30% figure I mentioned. This means you have 1 HCE at 9%, and 8 of 10 NHCE at 9%. this would pass the ratio % test of nondiscrim. But suppose instead 5 of 10 NHCE had between 1 and 2 years of service. This means you have 1 HCE = 9% 5 NHCE = 9% 5 NHCE = 3% rate group test would fail since more than 30% of the NHCEs have a smaller benefit. Avg ben % test (5* 9) + (5 * 3) = 6.00 for the NHCEs HCEs = 70% * 9 = 6.30, so you would fail avg ben % test if test is performed on allocation basis (without imputing disparity) possibly would pass on an accrual basis, but then you have the gateway minimum to worry about, and that may be a problem based on your definition of comp.

If the number of bodies who did not receive enough for top heavy is small, and that the actual amount involved is small, etc...that would sound like an insignificant operational failure (see Part IV section 8 of the self correction program) therefore you should be able to correct (provide additional contribution plus any gains to those who were missed) all this assuming that you have met all the other requirements such as have a determination letter, etc. you possibly have a discrimination issue - e.g. you have some ees who received 3% SHNEC plus additional profit sharing and a group of ees who will receive 3% top heavy only, plus a definition of comp that may or may not pass the 414(s) compensation test. assuming the number of bodies that are top heavy only people and have more than 1 year of service is less than 30%, then nondiscrim shouldn't be a problem.

Dan yes, as Pension in Paradise indicated. what the rule really should be is you can have any hours requirement you want, as long as you also have a provision that a person would be eligibile if they work 1000 hours in a 12 month period. but I had learned like you, if you dont have 12 months you cant have an hours requirement. It takes a bit to 'unlearn' things.

yes, Corbel has an amendment for the gateway language. My understanding is that they had submitted their volume submitter for approval before the language came out. It is my understanding that the special gateway language will not take the document out of 'approval status' or whatever terminology is used, but what the heck do I know.

the gateway must be provided to anyone who has received a nonelective contribution. since the plan is not top heavy, and the ee failed the hours requirement, the ee would not receive a nonelective, and therefore no gateway. if enough people fell into this category you could fail coverage. and of course, assuming such ee is a particpant, he would show with a big fat zero on the test.

It is not so much of prorate comp, but simply using comp from date of participation, very common in DC plans. you are correct, even if the document says date of participation, the ee must receive 3% of total comp

As to your first comments, I would also add that the document should indicate that deferrals are able to be used in the ACP test. Some documents might simply describe the ACP test as consisting of match and after tax contributions. others add "and those deferrals not used in the ADP test" or something similar. Now, as regards to what you describe, I would hold no one knows for sure. Even the ERISA Outline Book would describe it as Conservative approach vs aggresive approach. The example they use involves corrective distributions for the ADP test being made and then possible shifting (11.179 2003 edition) Personally, I lean toward the aggresive approach

this was one of the gifts of SBJPA. see IRC 401(k)(3)(F)- basically only one ADP/ACP test is performed, ignoring all NHCE who are otherwise excludable. This does not mean that the HCE is 'cast off' so to speak, merely that he is treated and tested as if he completed a year of service. There is no similar rule for coverage or even nondiscrim testing involving nonelective contributions.

I believe they are not 'carving out' the HCE(e.g. excluding him from testing entirely), but rather, treating the HCE as if he had completed 1 year of service. That is an option.

a nonelective can take the form and shape of a SHNEC, QNEC, or I guess an ordinary 'NEC', so there is only one 410(b) test, and since a SHNEC is available I would hope you are at 100%. Conceivably you could fail nondiscrimination testing since some ees might receive 3% only and others would receive more than 3%, but unless you have a lot of HCEs in that group I wouldn't expect passing the test to be a problem

take it one step further. suppose the ee doesn't get paid out his remaining balance until 20 years from now. would you now include his distribution because you include distributions made during the 1-year period ending on the determination date? (or does the fact you don't include ees who perform no service for a year override everything?)

if I recall, #14 was done by the Irish Rovers

#30 is really: Useless Hopeless Thoughtless Ridiculous POJ Gave Out Stupid Christmas (Puzzles to drive MoJo Crazy)

I would follow the guidelines set forth under the self correction program. It sounds like an operational failure (Failure to follow the terms of the document) usually that means sumpliy making the missed contribution for the particpant, plus any adjustments for gains.

so mojo, do you have the answers for all the interested parties? I am sure they can use your expertise - or at least the time you spent they couldn't. sorry, that is it. I don't have any more puzzles for you.

if my brain is working correctly (and that is debatable at this time of year) you indicated 4 NHCE 1 nhce gets 3% only 3 nhces get 3% plus integrated hce gets integrated for arguments sake lets say plan allocates 5.7% base plus 5.7% integrated lets further ignore any SHEC for the moment if you were to run the avg ben % test on an allocation basis you would have 3/4 NHCEs with an e-bar of 5.7 + 5.7 = 11.4 (with imputing disparity) if you run the HCE through the formula he would also have 11.4 (This assumes you are using 100% of the TWB) therefore on an allocation basis the plan has 75% of the NHCEs = hce so passes rate group test. In reality, as long as you are at 100% TWB the NHCE avergae should be the same as the HCE average - it is just the way the formula works - it doesn't matter what base % you use. ........ by the way, since you are at 75%, it sounds like this would meet the one item that says two groups can be treated as broadly available if you pass ratio % test.

Ron: Thanks for your explanation. It was clearer than what was put forward earlier. As indicated, I was unclear by his explanation and thought he indicated the system calculated a catch up greater than $3000. ........... As a side note, I did finally find in the preamble where it states "the ADP limit is determined after taking into account all deferrals (other than elective deferrals that are catch up contributions because of an employer provided limit or statutory limit)"

yes, I was looking at 98-52. 2000-3 is really clear, if you give a 'maybe' notice, then you must amend plan to allow for the safe harbor and give supplemental notice by 12/1 of the next year if you do indeed go safe harbor. odd, at that point it becomes a must. at the ASPPA conference this year the question was asked what if you missed giving a notice - of course it was for an ongoing plan, and the basic response was (in my own words), the document says you will make the contribution. thus, the error is an operational one. solution: provide the notice and 'take our chances' (even though it is late) this will probably not present a problem in the case of a SHNEC. in the case of a match, no known solution, I believe making an additional QNEC for those that didn't defer was implied, but my brain gears are a bit rusty at this time of year to remember.

its not the greatest copy, but the object is to identify the songs the example given is OCAYF which of course you realize immediately (yeh, right) as O Come All Ye Faithful good luck, Merry Christmas and give some people a chance to solve before posting the answers!