Tom Poje

the intent of the regs is HCEs don't get favored. the IRS sort of expressed this - I think in the proposed nondiscrim regs or maybe it was in their comments using short term employees to support a contribution... yes, by the mathematics you can prove a plan passes, but... ............ possibly the catch in your case, the intent (at least as I see it) under EPCRS, tis amendment rule is for a person who was inadvertently permitted to defer no, this sounds like a case in which a person was allowed to defer despite the knowledge he didn't meet eligibility, and "we can get away with it" because at the time such person was not 'technically' an HCE. part of EPCRS is procedures are in place to prevent such errors from occurring - how come this problem never happened before but for some reason when a person filling an executive position the procedure 'fell through the cracks" ...................... (but then you have to remember, at Christmas time I am a Grinch, and it clearly carries over to other times...)

are there other facts and circumstances? for instance, lets say you, as an NHCE deferred early in that plan 2 years ago and your deferrals were returned, how would you feel at this time? why all of a sudden a change in policy? I understand your concern, there is a certain 'smell' to this. Again, never in the past was a 'mistake' made in which someone was allowed to defer early and suddenly up pops a situation in which someone who is going to be an HCE was 'accidently' allowed to defer early and yet, I suppose, none of the other NHCEs in 2016 were accidently allowed to defer might be tough to prove but... of course, the chances of the plan being audited, and it being caught is another matter.

so yes it can do double duty, be used in the ADP test and also be applied to top heavy. the only cautionary note, somewhat alluded to above, a plan has to pass (a)(4) testing with and without the QNEC. 1.401(k)-2(a)(6) while this is usually not a problem, there could be HCEs who are not key who wouldn't get the QNEC but would be due the top heavy. there could be terminated NHCEs who receive the QNEC but don't get the additional to satisfy top heavy.

the only note I see in FT William is NOTE: The discretionary formula in D.6a must meet the nondiscrimination requirements regarding benefits, right or features described in Treas. Reg. section 1.401(a)(4)-4. so I guess if you aren't favoring HCES you are ok.(?) In addition there is language that says the discretionary is in addition to safe harbor then the discretionary will meet those rules as well.

duh. if she was I would use total comp (well, ok, if I thought about it!) ha. this is one of those plans with 300 nhces and a lot of non-deferring, so it helped pass the test.

ok, have a person who made $5150. deferral = 4756 I guess must have deferred 100% of pay. husband must pull down the big bucks and the comp isn't needed! soc sec = 7.65% * 5150 =394 5150 - 394 = 4756 so ADP % based on comp less deferral = 4756 / (5150 - 4756) = 1207%. software won't even use that, it caps at 999%. guess they weren't thinking that could happen when they wrote the regs.

scroll down to the tables (this is from the regs - there are 4 tables so scroll down far enough) and maybe that is what you are looking to find so it depends on the person SSRA and actual age https://www.law.cornell.edu/cfr/text/26/1.401(l)-3

4 is less than ONE MILLION still, if you are doing things quarterly, and there was enough change every quarter I could see an argument for quarterly testing

I suppose most don't think about it, or have forgotten it, or don't even know it exists... Why not use 1.410(b)-8(a)(3) Quarterly testing option? since, for purposes of match that is what you have. maybe that is a bother to test that often, but that plan design itself seems to make more sense and be more accurate of the situation.

maybe they are like me, I wait to file the 1099 electronically simply in case the forms get returned due to bad address, bad info or someone and then I don't have to file a corrected copy electronically. and then it gets busy due to testing and the 1099s get pushed to the bottom of things to do as long as it gets done by the end of the month granted, by this date, 3 weeks after sending out the copies to the participants, I guess you could argue that is enough time

yes, caveat being: assuming you don't have someone who only received the gateway based on mid year entry comp. they would have to get extra profit sharing to get bumped up to 3% based on total salary to satisfy top heavy

no, never read that. had a friend that had a copy, I think I looked at one or 2 pages and decided that type of 'humor' was not my style. as I recall, somewhat crude and vulgar. years ago I recall Red Skelton at the close of an act saying "You laughed and had a good time. And I didn't have to swear, cuss or use foul language" will always admire him for that. (I did try to liven up my attempted response to the question a little and make it easier to remember the next time)

sorry, I lied about the title of the book. It is really called "Bored of these things" but you have to understand, it is hard to find, almost invisible. I received it as a birthday present, it is precious to me......

no, before getting to component plan testing you have to pass gateway 1.401(a)(4)-9(c)(3)(ii) think of this way. you want to do nondiscrim testing which in some way involves cross testing. so you want to CROSS into that magic land, but there is a huge impenetrable hedge full of nasty thorns as well on one side. even if you could get to the hedge, you would first have to get over the moat full of nasty slimy things (including Flint water runoff). You tried testing on an allocation basis (which would avoid a gateway) but Gandalf is standing there saying "You shall not pass". So your only choice is to go through that magic GATEWAY. (first and foremost, before proceeding any farther down the road to cross testing land) hmmm. my copy of the regs says "Lord of the Things", but at least I can slightly understand it.

agree with Lou unless the document is oddly specific in how things are done. or put another way, if he receives 39000 in ps as Lou suggests plus his 2000 in deferral he has received 59000. he is over the 415 limit, so catch up comes into play. If I use the max catch up of 6000 then he has 53000. if the ADP test was previously run with him at 18000 in deferral it needs to be rerun because an additional 4000 is being treated as catch up.

maybe you just didn't find it in the document. here is language from FT William (i) Correction Methods. The Plan may, pursuant to applicable Treasury Regulations, do any of the following to avoid or correct excess contributions and/or excess aggregate contributions: (1) provide for the use of any of the correction methods described herein; (2) limit contributions in a manner designed to prevent excess contributions from being made; or (3) use a combination of these methods.

how do I know you are not doing that on your own time?

Belgarath: assuming I'm not an exception to the rule, the humor you mention, becomes very dry but, at least, I suppose it still exists, my understanding if you are an actuary it ceases to exist entirely.

it doesn't sound like it in your case. There is, the option to include comp in the prior year (assuming the document checked that option) - in which case you would have included that comp and contribution in the prior year - you can't get out of not including it in some year. but obtaining that info timely might be 'heck' unless you are in the habit of requesting it (e.g. give us W-2 comp, oh and for folks who quit in late Dec and have a final paycheck the next year, give us that as well), as the 415 snap on below indicates you would treat everyone the same etc. so for example, the ADP test, you include everyone who quit late Dec, those who deferred and those who didn't, etc. but this would require you to ask for that 'first few weeks comp' this is from FT William document: 15. Post Year End Compensation [ ] Determine Compensation using Post Year End Compensation NOTE: If selected, amounts earned during the current year and paid during the first few weeks of the next year will be included in current year Compensation. old language (not sure which document provider) from original 415 amendment going back a number of years.

Because of the issue with the investment house, it was still impossible for someone to defer. therefore, while every intent to start the thing may have been there, it simply was impossible. years ago at an ASPPA conference, the question was posed "A safe harbor notice was provided (3% shnec) but the plan was never amended for safe harbor. now what? the IRS response was there is no 3% due under the terms of the document. you may be on the hook for 3% via the DOL but that is a different issue. This may be similar, you told people they could defer, but in reality they couldn't. So are you 'on the hook' for making QNECs to make up for missed deferrals, and if so how much? in addition, it was not indicated above what employees were told...e.g. if there would be a delay, etc.

arguably, if there was no possible way for someone to defer the first year, then the 401k 'feature' didn't exist. (despite best intentions) this would be no different than creating a plan in 2016 with profit sharing only and adding a 401k feature in 2017.

John, I would lean toward using logic similar to what is found for situations in which plan limits for catch-up contributions are changed These final regulations retain the rule in the proposed regulations that a plan that changes an employer-provided limit during the plan year is permitted to use a time-weighted average of these limits as the employer-provided limit. For example, under this alternative method, a plan that provides for an employer-provided limit of 8 percent for the first six months of the plan year and 10 percent for the second six months is permitted to use 9 percent as the employer-provided limit for the plan year. These final regulations also provide that the plan is permitted to use the definition of compensation used for ADP testing purposes for this weighted-average simplification, and can use this alternative method without regard to whether the employer-provided limit is changed during the plan year. 1.414(v)-1(b)(2)(i)(B)

for example, typical language might be something like Eligibility is upon completion of 1 year of service ...... However, any Employee who was a Participant in the Plan prior to the effective date of this amendment and restatement shall continue to participate in the Plan.

if it helps in the description 'pretend' you have a controlled group 2 plans, one tested on an allocation basis, the other on an accrual basis each participant is in one or the other not both. when testing the allocation group all other participants are includable and not benefiting, when testing the accrual group all other folks are includable and not benefiting with a young hce in the mix deferring $$$$$$ you more than likely won't be able to use the avg ben test, so each 'plan' will have to pass the ratio % test. you can pick and choose who you want, but best results using young NHCEs in the accrual group.

getting closer Dave removed 'the 415 limit' and I now get the same screen. finally! it is because there are so many attachments over the years I made (though no where close to 415) - however, at the moment I haven't figured out how to delete the old attachments