kmciver

If the employees did not get the notice timely, then the plan is not a safe-harbor and will require adp/acp testing. You may also want to review the plan doc especially if the attorney drafted it. If it is a newer doc, it may tell you what happens in the event of failure to comply. Let's say the plan is not a safe-harbor. What about giving a QNEC to pass the test? Isn't this essentially the same thing as the 3% non-elective for safe-harbor. You may still need to refund to the HCE's but this seems to be a good solution.

I have a compliance client that is a S-Corp. Files returns on calendar year basis. They has a ps plan that has a 9/30/02 year end, which they never changed. I just found out that they started a 401(k) in April 02 (plan year 1/1/02 to 12/31/02). What can they contribute to the ps plan? The plan is updated for EGTRRA, but I'm not sure that it makes a difference. Thanks Karen

Thanks Tim, you got my question right. That is the way I have been handling Schedule T. When I went back to the instructions I realized that I failed read it through. It was the "and" between (B) and © below that I missed. I just read (a) and thought I was doing something wrong all these years. 4. Employees who fail to accrue a benefit solely because they: (a) fail to satisfy a minimum hour of service or a last day requirement under the plan; (B) do not have more than 500 hours of service for the plan year; and © are not employed on the last day of the plan year. Thanks for your help. Karen

I would like some clarification. All along, I always checked line 3d of a Schedule T if everyone is benefitting. I would not check it if an employee did not get a contribution due to EOY. Unfortunately, as I read the instructions, I see that the employee that fails to get a contribution due to EOY is not included in the count for line 3b. When do we ever complete the rest of Schedule T? It doesn't make sense because you can still fail coverage if you have a lot of EOY exemptions. Also, how is it handles when you have a new comp plan with employees benefitting at different rates and you need the average benefits test to pass? Thanks, Karen