Search the Community

Client went through high turnover this year. 2 HCEs 1 NHCE > 1000 hrs 3 NHCEs terminated - 1 > 1000 hrs, 1 900 hrs, 1 < 500 hrs. All left months apart, voluntarily. Two were partially vested. 2 HCEs defer 3 NHCEs defer HCE owners want to max his allocation. Profit-Sharing has last day/1000 hr condition. I think I have to add back 2 terminated NHCEs to pass 410b Wrinkle - Plan has "New Comparability" checked as allocation. Historically, allocation has been Integrated. I think I can allocate as if "integration" was check on the AA. Just want to make sure my "bad news" is solid.

Company A just bought a bankrupt company's assets. A new company is created out of the bankrupt assets: Company B. Company B is a single member LLC owned by Company A. The employer is wanting to keep Company A 401(k) separate from Company B 401(k) plan. Easy enough to set up the new Company B 401(k) and move forward. Both plans are going to be setup with same plan year ends and the same plan provisions. The potential difference is profit sharing contributions per plan. Plan A might be 5%, Plan B might be 0 or 2%, or whatever based on their own profitability. If I understand this correctly, as long as each plan satisfies coverage (410b), each plan can do whatever they want for profit sharing. Here are some numbers.... Company A: Non excludeables NHCE 468, Benefiting NHC 426, Non excludable HCE 27 Benefiting HCE 25 Company B: Non excludeables NHCE 90, Benefiting NHC 80, Non excludable HCE 2 Benefiting HCE 2 Company A coverage: NHCE 426 of 558 equals 76.34, HCE 25 of 29 equals 86.21, 88.56% Passes Company B coverage: NHCE 80 of 558 equals 14.34, HCE 2 of 29 equals 6.90. 207.89% Passes 1. Is my math correct? 2. If so, test separately, profit share each company separately. Am I missing anything obvious?

I need help to see if my logic is correct... Small plan. 3 NHCE and 2 HCE. Discretionary match and profit sharing. Allocation suspension applies. Last Day and 1000 hours for match and profit sharing ( 2-tiered). Top Heavy Plan. Participating Comp. Semi-Entry. One of the three NHCE terminates in 2016. So 410b fails (m) and (a) at 66.67%. Can't use ABT because of suspension. So the terminated employee must benefit to pass 410b. For Match: the terminated employee does not defer so does not get match. No allocation condition is going to get him a match. I yes-override employee in Relius to get a passing (M) test. In essence I have removed the last day allocation provision and because employee is able to defer, the employee benefits for match..... at least that is my thoughts. Profit Sharing: the terminated employee shares in the profit sharing after "removing" the last day allocation provision. Employee came in 7/1/2016 so use compensation from 7/1/2016 to day of term. I would guess if Top-Heavy allocation would be greater than profit sharing, I would put in the TH contribution amount. Profit sharing is greater in this case. Am I missing anything in this scenario? Of course, I tell the bosses and sales team to ask about number of employees and design plan accordingly.....

Is an amendment to correct for a failure under 410b required to amend the plan for the plan year in which the plan failed or can it extend to future years? The failure in the instant case was with respect to excluded classes and hour requirements. Thanks.