Tom Poje

statements are a wierd item. ERISA 209 reads as follows every employer shall provide [info] to each employee who: A) requests such report B)terminates or C)has a 1 -year break in svc. in other words, there is actually no requirement to provide annual statements to most people! That question use to show up on the ASPA test from time to time, simply because it is engraved in everyone's head that you have to provide something evry year. Now, I would say it makes sense to do provide annual statements (simply to show vesting and contributions) but one doesn't have to. And if one person requests a statement you know there will be others, so it is easier to do things in one batch. I suppose in your particular case you could dummy up something indicating the contribution only, to be passed out along with the SAR if you have finished that..

PATA: if a person is allowed to defer before meeting plans eligibility requirement, the self correction amendment is to change the eligibility requirements for ANY person falling into that category - not just the person in question. Its part of EPCRS

check her status in census (benefits/contributions) to make sure the box is checked 'statutory exclusion'

ooooh. thats good. I'll have to have you write my material. Or have you come to my work. then maybe I can have a little time to write something like "Relius and Component Plan testing"

was that 'signing' or 'singing'? some of us gotta work hard at it. not like Blinky who can mass market a toy image of himself!

The story of how I ended up on the book is probably more interesting. no wait, definitely more interesting. Amy Cavanaugh wrote the original edition. She adds all the good stuff to the book - Davis BAcon information, some info on Puerto Rico plans and a bunch of other stuff. Anyway, I was doing a Quantech (Relius) training. The boss 'rents' me out from time to time, so I end up doing a training from an administrators viewpoint than a vendors . But not daily! I don't do daily. Usually include some Crystal stuff, and nondiscrim just depends on what people want. (And a pension song!) Anyway, I had never heard of the book before, nor did I even know Amy had anything to do with it, but I spied a copy on the shelf, so was leafing through it on break. The training was at the company she worked for, so that is what ties all this together. Anyway, I was stupid enough to open mouth, insert foot, and mention some things it would be nice to have in the book. And then of course she promptly said, good, you can help edit all future editions. Its a Panel publication, but I think Aspen Publishers is the actual name you find it under. Hopefully Mr Baker will let me type www.aspenpublishers.com without incurring his wrath.

Mark: was this your one and only post you are allowed for a year?

maybe. what was her status a few years ago? if she was considered key a few years ago, she might be a 'former key' now, which means you would ignore her balance entirely when determining top heavy status for the plan.

I believe your statement is correct. I think one problem is the terminology of using gateway minimum. any dc plan that uses cross-testing is subject to a gateway (not gateway minimum) gateway minimum is simply the most common one used. but an age weighted plan is really no different than a plan with broadly available bands - you are simply using 1 year age differences rather than 3 or 5 or whatever. the broadly available is simply another gateway.

not so sure on the nondiscrim part you started with 5 nhces, all receive the safe harbor only 3 receive the additional age weigheted piece when testing rate groups it is conceivable you could pass nondiscrim testing nhce concentartion is 5/7 = 71% so midpoint = 36.75% that would mean you need only 2 nhces (2/5 = 40%) to satisfy rate group providing avg ben % test passes. now normally an age weighted plan is exempt from the gateway, but you actually have a SHNEC + gateway. I think to do testing you have to kick the ees up to 1/3 of the HCE or 5%. I certainly could be wrong on that, I haven't seen this scenario addressed before.

and since the ee received 3% SHNEC which is a type of nonelective, the ee must have an additional contribution if necessary to receive the gateway as well...

and I might be using the term 'snap on' incorrectly. the way Iunderstand it Corbel had submitted their documents for approval before gateway was even an item. hence the reason the language is not there. I think Corbel then got approval for the gateway language which you add to your document without taking it out of the volume submitter or protype or whatever status it is in. but I don't do document work, so I dont know how all that works. there are a lot better geniuses out there in the document area than myself since you indicated the document was Corbel I would guess you can call them and verify what needs to be done.

the document should say what period of compensation to use. look under definitions. I suppose its possible the safe harbor notice might say what period of comp to use for the safe harbor. I would doubt it is different from the plan, but one never knows. for the sake of argument, lets assume date of participation. then ee gets the 6.8% from date of participation or 3% of total comp since the plan is sure to be top heavy.

you have 9 1/2 months after plan year end in which you could use a corrective amendment under 1.401(a)(4)-11(g) Depending on who the document is with, amend plan to include gateway language. e.g. I believe Corbel now has snap on amendment to accomplish this

Merlin: you are much too complimentary(I am a bit humbled, somehow or other I have ended up with this amount of knowledge about cross tested that I can share) While the book provides a lot of info (as does the ERISA Outline book) the question at hand gets a bit more comlicated. (e.g. there is more than one HCE and there are spouses involved, etc)It gives me a good idea for a new chapter, something along the lines of what makes good candidate for cross-testing. Unfortunately, at the moment I can't even see my desk. PATA - 1. if current plan has last day provision you can amend anytime 2. if you go with a class plan, be very careful - if you name one class 'owners'- spouses (and children) are included. better to use the term 'owners not by attribution' or something similar. -and you have my e-mail, so feel free to write if you get stuck on something, I generally am willing to try and help, but at the moment....well, I would like to see the light of day.

it depends on your document. repeat, it depends on the document (or possibly the Notice depending on how things are written.) The safe harbor goes to all eligible for deferrals, but you do not have to provide it to 'the otherwise excludable' see Notice 2000-3 Q-10 if you use this option, you lose the free ride on top-heavy

someday I will have to write something up on the baisics of cross tested - oh wait, I am suppose to give a talk at ASPA in the fall dealing with this or something similar. Usually such talks involve doing something fancy with cross testing, such as component testing, etc. I just want to do a good basic one on where the E-Bar comes from, how can you tell what a good candidate is, what happens when you add a 401k feature, etc. Personally I think there are too many factors involved to give a real quick answer- it depends if you want spouse to get extra, if the goal is to target the right hand man, etc. Using an average 9 year age difference, 1.085 ^ 9 = 2.08 so if the NHCEs get 5, the HCEa can get 2.08 * 5 = 10.42 and still be in the same rate group. a little bit more when you impute disparity

if base % is 16.78 then doing the numbers, plan fails testing on allocation basis. it appears plan can be treated as having broadly available rate bands (differences due to integration are disregarded. therefore plan can now cross test - no gateway allocation required since another gateway has been met. hopefully at least one NHCE will have an E-Bar greater than the HCE

Before even starting an answer, lets say this. It is unimportant that a plan has a 'cross tested formula' as you described it before you worry about the gateway minimum. if a DC plan tests on an accrual basis then the gateway rules come into play. In your particular case, you actually have a 'cross tested formula' anyway - you have 2 classes of people - one getting one % and the other getting 3% ok, lets see if this flies with the facts provided. you said there were 3 participants, one gets top heavy only, so I will assume the following 1 hce 1 nhce full benefit 1 nhce top heavy. for coverage, sched T, 100% benefit for nondiscrim, initial pass 50% of NHCE receive same rate as HCE so plan fails ratio % NHCE concentration % = 2/3 = 66% so midpoint = 40.50% ratio % > 40.50 so plan passes nondiscrim classification test. Under the rules, 2 allocation rates may be aggregated in a manner similar to the rules that permit aggregation of BRFs. The example in the preamble reads something like this: One group receives 10%, another group 3%. If the group thet receives 10% satisfies 410(b) (WITHOUT REGARD TO THE AVERAGE BENEFITS % TEST) then the 10% group can be allocated with the 3% group and treated as a single allocation rate for purposes of determining whether the plan has broadly available allocation. Thus it appears that your plan has broadly available rates and therefore would not have to provide the minimum allocation gateway. But even all that aside, what would happen if the plan was tested on an allocation basis, and thus not cross tested. You indicated the plan was comp to comp. lets suppose the formula gave 9% to the 2 ees, and the HCE is at 200,000. testing (w disparity) would produce the follwing: HCE 9% + 5.7% = 14.7% NHCE 1 same NHCE 2 3% + 3% = 6% ratio % =50% which, as indicated above is sufficient to pass nondiscrimination classification test. avg ben % test HCE = 70% * 14.7 = 10.29 NHCE = (14.7 + 6 ) / 2 = 10.35 this would pass avg benfit % test, so plan passes nondiscrim on allocation basis

Mike, would that be the Ides of March?

this one has come up a number of times. and the answer is that no one knows for sure at this time. I understand some IRS officials actually think the amendment has to be done before plan year begin! Currently I hold (though haven't actually had to exercise it) to the idea that since any refunds have to be completed by 12 months after plan year end, it is reasonable that you could amend within 12 months after plan year end. I have seen others hold to this position as well. but, no one knows for sure.

ugh, I knew this issue has come up before and I opened the...ugh...drawer of drawers where I stuff print outs of miscellaneous material, and I found some notes going back to Jan 1999 from PIX regarding the same question Where is Mike Preston when we need him, he weighed in on this one as well years ago. If I remember correctly at the 2001 conference the conclusion from the panel was something like 'then we agree to disagree' Anyway, back in 1999 One comment said that the IRS clarified that it was a reasonable classification - in writing, but unfortunatelly no actual cite was provided. supposedly it was from one of the National office memorandums. I prefer the comment that said "I can argue the position, if need be, that providing contributions to only those employees who stay through the end of the year is an objective business criteria for rewarding employees"

gee whiz, I need one of those jobs 'as time permits'. glad to hear that at least you can sneak by this year! sometimes you get lucky!

A good example will suffice. If both you and the owner deferred 5%, and he receives no OT, this could clearly be considered discriminatory. especially if there is a matching contribution involved. without more facts I wouldn't want to say more. There are other issues such as how many HCEs (those making more than 90000) there are and whether they have OT

lets say enough pr was made to allocate 4% base + 4% excess you would then have: avg ben % test NHCE E-Bar = def + match + 3% SHNEC + 4% PS + impute on the PS piece rate group test = 3% SHNEC + 4% PS + impute on the PS piece HCE = def + match + 3% SHNEC + (4% PS + 4% excess) + impute on the PS + excess piece