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Showing results for tags 'ratio percent test'.
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A 401(k) plan has 1000 hour and last day requirement to receive match - fails the 401(m) ratio % test for 2020. In regards to correcting Coverage, the plan document states: "The Employer Contribution will also be allocated to individual Participants in the order specified until the Plan satisfies the minimum coverage requirements. A Participant, and all similarly situated participants, will be included only if necessary to satisfy those requirements." It then goes on to say you start with participants that worked the most hours that were still employed on the last day of the year, then work your way down to terminated participants with the most hours... We need to bring in several NHCE that terminated prior to 12/31/2020 to pass the ratio % test for 401(m). We have two HCE that are not benefiting under 401(m) because they terminated employment before 12/31/2020 who worked more hours than any of the NHCE we are bringing into the match. Does the "only if necessary to satisfy those requirements" allow us to ignore those two HCE's? I sure hope so because we can't pass if we have to include those two HCE.
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I know this has been discussed a few times, but anyway: Suppose a profit sharing only plan, not top heavy, has the profit sharing allocations with each participant in their own rate class. Assume 6 NHCEs and 1 HCE - all eligible for the plan. Also assume the plan has a last day requirement in order to receive an allocation. 2 NHCEs quit - both worked over 1000 hours. The document does not show an election to apply any "automatic fix" provisions for a ratio percent coverage test failure. Running an average benefits percentage test for coverage essentially requires a classification that is reasonable and is established under objective business criteria. Would this plan be allowed to run the average benefits percentage test for coverage purposes? Or, must the plan resort to a 1.401(a)(4)-11(g) amendment to make the plan pass the ratio percent test for coverage? Would the answer be any different if the plan had no allocation condition (no last day requirement)?
