JJ

Mr. Bagwell, Thank you so much for your feedback! Your assumptions are correct that the plan did not make everyone eligible at 5/1/16. All employees have to meet eligibility requirements. The plan uses participating compensation and the entry date for the match is monthly. The adoption agreement states - "Each participant who satisfies the eligibility requirements for a Plan Year shall receive an allocation of Employer Matching Contributions for that Plan Year. Such allocation shall be an amount equal to 100% of the Salary Reduction Contributions that were deferred during that Plan Year while he satisfied the participation requirements for Employer Matching Contributions, and that do not exceed 6% of his Compensation received during that Plan Year while he satisfied the participation requirements for Employer Matching Contributions." Based on the adoption agreement and assuming the hypothetical employee in my original post has been making 10% deferrals since 5/1/16, am I correct in saying that for purposes of ADP test, his ADP % would be $8,000/$80,000? for purposes of calculating the match, his deferral % is $6,000/$60,000 because he became eligible for match on 7/1/16? Additionally, the plan excludes a group of employees from receiving the match and fails to satisfy the ratio percentage test. To run the average benefit test, do we calculate his Ebar using his annual gross comp($120,000), comp since plan inception($80,000) or participation comp for match($60,000)?

I am working on a plan with the following situations: A new 401(k) in place effective 5/1/16 with 3 months eligibility for EE deferrals 6 months eligibility for employer match ER matching 100% up to 6% of compensation 415 Limit Compensation definition that includes EE deferrals true up contributions after year end A hypothetical employee - Date of Hire = 1/1/2016 Monthly compensation in 2016= $10,000 2016 annual compensation = $120,000 Made10% deferral contributions only for 2 months (10/2016 & 11/2016) At the end of 2016 plan year, the total deferrals = $10,000 x 2 x 10% = $2,000 Questions: What is the compensation amount that should be used to calculate the deferral rate for purposes of ADP testing and true up contribution? Is it $120,000 (annual gross comp.) or $80,000 (comp. since plan effective date 5/1/16) or $20,000 (comp. for the months in which the participant made deferral contributions)? What is the compensation amount that should be used to run the true up calculation and ACP testing? $120,000, $80,000, $60,000 or $20,000? The plan has a class exclusion and fails the Ratio Percentage Test for 2016. What is the compensation amount that should be used to run the next step - Average Benefits Test? Thank you!