Tom Poje

are you talking reports or simply scrolling through census? if its scrolling through census I don't think that is a feature yet. if it is reports, they exist. we have one soa which uses user field 1 instead of division, but that would achieve the same results.

sorry I haven't been able to respond, our system crashed out Monday. when you say 'the end result is that Quantech says the test FAILS' which part is saying the test fails? I have only had one plan in which the plans ratio percentage was less than the midpoint, and on the individual it said passes. However, plan wise it did fail. e.g. suppose I have one hce. plans ratio percentage was 18%. obviously the ees ratio percentage is 18% as well. Lets further say the NHCE concentration % is 80%. resulting in a midpoint of 30%. Therefore, the lesser of the two is 18%. I think this is a strange scenario in which the individual passes, but plan wise you never really get to the cross testing (401(a)(4)) testing point because you fail 410(B) At 18% there is no way you pass the 70% test. And since The ratio % is less than the safe harbor and unsafe harbor you fail the average benefits test. (If it is saying FAIL on the rate group report, it could be a bug in that the system is not looking at the fact it is =. I haven't seen that happen, but anything is possible. You also didn't mention which version you are running...there is a pre svc pack 7 available on the Corbel website that has fixed a few problems that have cropped up (rdiscrim 6/22 is what I am running)

a safe harbor contribution can be one of two types - a match or a non elective. In your case, you indicated it was the non elective. (I jokingly refer to them as SHNECs as opposed to QNECs) Remember, the regs clearly state they can serve for top heavy and cross testing as well. And all nonelectives count in the a(4) test. At least that is my understanding. It would be the safe as top-heavy - those ees wouldn't normally receive anything either! If this individual fell into the category of 'otherwise excludable' then she could be tested separately.

for the average benefits % test you inlcude evrything and divide by the total number of bodies. for 410(B) you have: 401(k) includable and benefiting, she could have deferred 401(m) excludable - she couldn't get a match even if she deferred. (Note - she should also not be a part of the the 401(m) test as well - if you have to run one. you did not indicate what the match formula was, but if it was on more than 4% of comp, you would have to run the test) nonelective - includable and benefiting for cross testing, remember not to impute disparity on the 3%

I am working with a document that limits contributions to the HCEs in order that they receive no more than 1/3 of the contribution. It dawned on me that since the 415 limit will now be 100% rather than 25% of copensation per individual, does it make sense to have that feature in the document? I suppose if you were going to have mega-forfeitures or mega-dividends it might make a difference, but any other scenarios, or am I missing something.

Maybe. That is a good cop out answer, isn't it. I think it depends on whether you can pass 410(B) without the top heavy group or not. but I am not 100% sure, so these are just my thoughts. I guess by the end of 2002 we will probably know a lot better. In the Federal Register comments (vol 66, No. 126) there are some comments on whether a plan satisfies broadly available allocation rates. One group of NHCEs receives 10% and another group receives 3%. (I am assuming the 3% group is top heavy)The final regs permit two allocation rates to be aggregated in a manner similar to the rule that permits aggregation of certain B,R,F. This rule permits excess NHCEs with a higher allocation rate to support a lower allocation rate - if the 10% group satisfies section 410(B)[w/o regard to the average benefit percenatge test]. There is also logic that says, or would seem to be similar to the idea for schedule T you treat all ees as includable and benefiting, but to be considered 'safe harbor' you treat the top heavy group as includable and not benefiting and see if you pass 410(B). thus the top-heavy people are 'not benefiting'. I think you have to be careful about the logic that is used. In your case, you have an ee who has less than 1000 hours and wouldn't normally receive an allocation. That seems to be clear cut. This is different that saying, all NHCE receive 0, oh, the plan is top heavy so I have to give them 3% top heavy.

Doug- sorry, I have been out for a few days. I see I could have been a little clearer on my response as well. I was only referring to performing the average benefits test under 410(B). I agree there does not appear to be anything in the regs saying once you pass 410(B) and get to 401(a)(4) you can't cross test at that point

that is the way I have read it as well, so I don't think you are reading anything into it. you just have to remember in 2002 you are deducting that contribution...e.g. you cant make a 25% contribution in 2002 cuz you already used some of it up. All this hinges on the fact that normally you would deduct the amount the same year you deposit it. however, a special rule says you can deduct it in the year it applies to. so used to deducting it for that reason, usually one doesn't consider deducting it in the year made.

in an ideal scenario, make the deposit to the mp on 12/31, and roll all the assets to the profit sharing plan on the same day. File a final 5500 for 2001 and wash my hands of the money purchase. because of J & S you would have to make sure to track the olf mp balances.

Andy - your statement that both plans must be included if one of them is cross tested - that is a true statement, depending on how you are using the term 'cross tested'. Unfortunately, many people (and I would be included in the bunch) refer to any non safe harbor plan as cross tested. Technically, that is not true, since I could actually test a DC plan on an allocation basis under the general test. I wouldn't really be cross testing at that point. I just wanted to make a clarification on the terminology used. sort of like saying someone is 'excluded'. do you mean from the plan or from coverage. its not necessarily the same thing.

somewhat true, but maybe you could of worded it better. If you have both a DB and a DC plan, you are allowed to have two Average Benefits Tests - one for the DB and one for DC. However, the DB must be on an accrual basis, and the DC must be on an allocation basis. If you have a non safe harbor plan, you must use the general test to prove nondiscrimination. This does not require you to cross test, though chances of passing are pretty slim at that point. Conceivable you could have a class plan where a group of NHCEs receive the same % as the HCEs and you might be able to pass by testing on an allocation basis.

assuming the plan is not providing the minimum gateway of 1/3 of the HCE (up to 5% cap), but rather providing a smoothly increasing rate group, the rules say 2* or 5%. in other words you could not have 3% for age 25-34, 8% 35-44, 13% for 45-54, etc. This is because the first age range, while meeting the 5% range, fails the 2 times test. In other words you would have to have the following: Ratio of allocation rate to previous band < age 25 3% N/A 25-34 6% 2.00 (6/3) 35-44 9% 1.50 (9/6) 45-54 12% 1.33 (12/9) 55-64 16% 1.33 (16/12) 65- 21% 1.31 (21/16) (There is also a ratio of allocation rates as well) as long as the ratio is < or = to previous one you are okay. In other words, if all employees were less than age 25, and the owner was age 55-64, then your allocation could be: 3% to the NHCEs and 16% to the HCEs. (Note this is not 1/3 of what the HCE received. of course, then you still have to pass nondiscrim testing.)

there is nothing in the regs to tell you how to handle ees with 0 comp. at last year's ASPA conference, the IRS did say it is reasonable to treat HCEs with 0 comp as ineligible for the year they had 0 comp. Therefore, it would seem reasonable to treat NHCEs the same way.

yes, no, maybe so. It depends on how you treat the plans for coverage. Obviously for coverage, I have to count all employees as being employed by one employer. (IRC 414(B) and ©). This determines my body count for the denominator. Now, are you going to permissively aggregate the plans for coverage? If you do, then you must aggregate for the ADP test as well. If you do not permissively aggregate for coverage, then you only include Plan A bodies in Plan A's ADP test and Plan B bodies in Plan B's test. Thats because the ADP test only includes ees actually eligible to defer. Or perhaps it is easier to think of it in regards to the ACP test - you exclude those bodies who couldn't get a match either because of hours or last day. all this, of course effects what you put on your schedule T as well. hope all is going well! long time no see!

that is my understanding of the regs, that an ee, elig to defer, must receive a top-heavy contribution even if not eligibile for the profit sharing portion of the plan (e.g. immediate elig for deferral, 1 year wait for profit sharing) some others on this board have pointed out that documents do exist that even exclude this group from top heavy and have IRS approval. Based on the fact you can exclude these people from safe harbor that would only make sense that it is possible to do this. you have to remember that top heavy rules were written before 401(k)s came into glory, so some issues such as top heavy in 401k with immediate eligibility have never been addressed. My reading of the new regs in regards to safe harbor and top heavy is that they only apply if no other contributions besides the safe harbor contributions are made. the wording in the new regs says "The term top heavy plan shall not include a plan which consists SOLELY of " [a safe harbor arrangement] In other words, if you make addition contributions (cross tested), then you no longer get the free ride on top heavy.

the effective date of the plan can be 1/1, but the safe harbor portion is based on the date when employees can first defer.

if employee was hired toward the end of the year (assuming after 7/1 in a calendar year plan, then even a plan with immediate eligibility could treat the employee as 'otherwise excludable'. other than that, not much of a way out.

we are waiting for further clarification on this issue. the ASPA webcast seemed to indicate it would actually effect your 2002 plan year. e.g. you use the new rules and look at 12/31/01 balance.

sometimes it takes awhile to find a source or comment or whatever one is looking for. I found what I was looking for in The ERISA Outline Book 1.229 of the 2001 edition. D.1. Standardized adoption agreement "...A standardized adoption agrrement is restricted to options which guarantee the employer's plan will satisfy coverage and nondiscrimination requirements." therefore, by following the terms of the document (and I don't see how you can't- and as you indicated the SPD indicates you are to do this as well) you run the possibility of failing coverage. e.g. suppose I only had one NHCE, who entered the plan, but in the current year worked less than 500 hours. By terms of the document, you would not give him a contribution. now you fail coverage. I am not a document expert as to what happens next. Normally, in a standardized plan, you are relying on the opinion letter. I don't think you can do that since your plan could fail coverage. I yield to someone more expert in that area.

to me it sounds like a really poorly worded document - or perhaps better yet, is there an SPD, and what does that say. the statement: 'Any participant who is active and all terminated employees performing less than 501 hours of service shall not share in employer contributions...' I could read this as saying any participant who is active (no hours requirement) and all participants < 500 hours shall not receive a contribution. - that interpretation would make no sense. the fiduciary has been reading this to say anyone < 500 hours shall not share in employer contributions. [if so, why didn't they word the document that way] while that is certainly possible in a plan, I didn't think that was possible in a standardized plan. The typical language is as follows (assuming it has been updated for law changes): employees to share in the contribution are for plan years commencing on or after 1/1/90, participants who complete at least 501 hours of service during the plan year {therefore it doesn't matter if you quit once you complete 500 hours} OR are employed by the employer on the last day of the plan year {thus it doesn't matter how many hours you work if you are there on the last day} If the plan has a 1-year break in service rule,the suspension from participation occurs the year following the break in service, not in the current year, thus a coverage problem could still exist. I'd be curious to hear if others have encountered a plan with language such as Nabiyah has described. All that being said, I suppose if you follow the interpretation of the document, the fiduciary could be correct, but then I don't think you really have a standardized plan, in which case I think there exists issues such as reliance on the opinion letter/determination letter, but I am not a document guru - I yield at that point to someone more versed in that area.

the regs are written to say that all employees still employed at the end of the year (actives) are treated as either: ineligible - never met the eligibility requirements includable and not benefiting - enter the plan but failed hours or last day requirement to receive a contribution includable and benefiting - entered and met hours requirement to receive a contribution in the case of a standardized plan, all active employees (those still working on the last day) receive a contribution - there is no hours requirement. that is what the document means by active employee. it does not mean anyone who simply worked during the year. in the case of terminees, the regs allow you to excluded any terminee with less than 500 hours. therefore all terminees who worked more than 500 hours will also receive a contribution. The plan could even be more generous and do away with any hours requirement as well for terminees. therefore, in a standardized plan, your ratio % has to be 100% everytime, every year.

is this owner by himself or are there others in the plan as well? If using Relius to calculate ideal salary, it will reduce the sched C income by the contribution to others as step 1 in the calculation - but only by the profit sharing portion, not the match, unless they have changed the program. this means the estimated gross profits value you enter in specs should be reduced by the match. sorry, my brain isn't fully functional enough to answer your question on the other part at the moment (heck, its late on a Thursday)- I would run him as one ee...if sched C is going to put him over the $ limit, then I guess its a moot point.

It depends on whether you are permissively aggregating them or not. If YES, then I guess you could simply print both reports and add the numbers together. If not, then you could enter the number of nonbenefitting nonexcludables in the box and print the results. this will work for the ps piece only. I suppose you could also add the numbers as well, but only to the denominator. If you want an actual report, save to a file and modify in Word. I am assuming you have them as separate plans and separate employers. It would have been better to have one employer and two plans. watch out if eligibility is different! you will have to adjust the numbers!

ok, now I am confused. I looked at page 12 of the 5500 instructions I have: it says exempt if... plan is not db.... etc etc in the case of the plan that is NOT a profit sharing... but page49 seems to have the exact verbage (with one exception) do not complete if plan is not db.... etc etc unless the plan IS a profit sharing or am I just reading it wrong. I hate it when double nots get tossed in there.

That would be my understanding of the rules as well, unless that group was actually excluded from the plan itself (rather than just excluded from a contribution by class)