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Apologize in advance for the rudimentary questions, have already tried searching previous threads for my answers. In my limited understanding when doing new comp, my goal is to maximize the HCE's total contributions. The remaining gateway to eligible NHCE is the lesser of 5% of comp or 1/3 of the highest allocation percentage of an HCE. Upon 401(a)(b) failure, is it in my best interest to allocate more to the elder NHCE's? If so is there a general formula to achieve the correct amount? In my experience the 401(a)(b) seems really finicky and feels almost arbitrary at times. Once again I'm sorry if this isn't the correct place to ask, my previous resources weren't helpful for me.

Development company with around 50 employees in California. All of the employees would be considered NHCEs as none of them have any company equity and do not make more than $120k (Besides the CEO). All other employees would be NHCE because of this. Would like to set up a new comparability profit sharing program where the employees who did well on their projects (All NHCE) can be set to one "group" on the new comparability profit sharing plan and have the highest % rate. The HCE (CEO) would be set to the lowest % rate (1%) and thus, the remaining other employees would meet the gateway test if they were set as 0.35% (1/3 of HCE). Would this setup satisfy the cross-testing requirements along with any other requirements? Basically looking for a method to utilize profit-sharing but provide as much % possible to the employees excelling at their projects and providing as close to 0 as possible for other remaining employees (Which would include the CEO). Any advice would be appreciated!

Having a brain freeze... 4 participant plan - 2 HCEs (father, son) and 2 NHCEs (1 young, 1 older) Plan provides 401k, 3%SHNEC and discretionary PS by rate group (ea ppt is in own) The Gateway is 5% QUESTION: I would like to restructure for (a)4 testing: 1 HCE (father) and 1NHCE (younger) based on cross-testing and 1 HCE (son) and 1 NHCE (older) based on allocation rate testing. Each will pass coverage at 100%. Provided the C/T group passes (and it does) and the the Allocation Rate based group passes (proposed same % for HCE as NHCE), the Plan passes, correct? Am I forgetting anything? Thank you.

Good afternoon, This is a "what is your shop doing?" question. Some years back, before each participant could be in his or her own group for new comparability contribution allocations, groups were specified in the plan document. For example "partners, family members of partners, supervisors, clerical staff, the office manager, and Top Heavy minimum participants". Each year, we (where I worked at that time) did a document something like a resolution of the board of directors approving a specific dollar amount of contributions per group for the year in question. We got it signed by the employer and provided them with a copy for their records. With the advent of each person being in his or her own group, those resolutions of the board of directors went by the wayside. The employers I worked for stopped doing them. My current employer was wondering if that's really okay and wants to know what the rest of you are doing. I did look it up in Sal Tripodi's bible, and found "Written direction could take the form of a separate letter, the acceptance of a proposed allocation report that shows how the nondiscrimination test would be satisfied, or an entry in the memo section of the contribution check." I believe my predecessor in my current position was using the part in italics above to justify not doing the resolution anymore. We run the numbers, we test, we send the employer a proposed contribution allocation, he accepts it and makes the deposit, say, at John Hancock in accordance with the contribution report. Later the employer gets that contribution report and the accompanying testing in the annual report for his archives. With that, my predecessor said that was enough, and there was no longer any need for further documentation. What are the rest of you doing? Thank you as always.

Good morning to all, We have a client, a medical practice, with one owner-doctor, 100%, and two non-owner doctors, along with some rank and file employees. The plan was set up to exclude "non-owner doctors" from eligibility to participate in the plan. All the doctors are HCEs. Now, the owner-doctor would like to make an offer of employment to a new non-owner doctor and he wants to make the plan available to just this new non-owner doctor but not the two non-owner doctors he already has. We were thinking about amending the plan to simply exclude the two existing non-owner doctors by name. As we have never done that before, we are not 100% comfortable doing it without asking the advice of the experts. Would you do it that way or is there another technique? As an aside, every year when the rate group testing is done for the new comparability profit sharing contribution, our software includes the two existing non-owner doctors in the test, even though they are not eligible to participate in the plan. We are not 100% comfortable with that, either, and would like to know if this is really right. The fact that they are HCEs and they do not get a contribution helps to pass the tests and that doesn't really seem "fair" but if it is permissible, we will continue to take advantage of it. Thank you in advance for your advice!

A plan decides upon a profit sharing contribution for 2017 that allocates a different dollar amount and percentage to each participant. This complies with the cross-tested formula in the plan document and passes testing. When preparing the notification from the employer to the Trustee (see Padilla memo), do we have to list each employee separately? Can we refer to an attachment, which would be our allocation spreadsheet? Alternatively, can we combine the 3% safe harbor and profit sharing when referencing the amount on the trustee notice? This would make it much easier for this plan. They basically were trying to allocate a set dollar amount to certain employees, but it is a combination of the 3% Safe Harbor and profit sharing, so the profit sharing is all over the board due to differences in compensation.

I have a safe harbor new comparability plan. They are unable to pass average benefits test due to one of the owner's 90% deferral rate. Therefore new comparability isn't working. Can we shift to an integrated format and bypass the average benefits test? We pass coverage, etc.

My question pertains to the ability to amend a profit sharing formula if the plan has the last day rule requirement. Suppose the last day rule requirement is in place. I understand that you can amend the allocation method prior to the last day of the plan year. However, can you amend the method to New Comparability? I thought that the allocation groups have to be stated in the adoption agreement prior to the beginning of a plan year. Please correct me if I am wrong! Thank you