Statuatory exclusions for general non-discrimination testing in Relius

[Guest Tbrown]

Be aware that Relius is not properly handling statuatory exclusions on their general non-discrimination testing. I have alerted them and they are working on a fix. My guess is that it won't happen for a while. We noticed this at 7.0, but I believe it was also this way on 6.0 (chances are it has always been this way). Relius strictly looks at 18 months as its exclusion period and I do not know of any workaround.

Tim

[Tom Poje]

Hi Tim!

actually, no one knows for sure how to handle 'statutory exclusion' issue.

I did some research into this, in fact I think there is an article in an upcoming issue of the Journal of Pension Benefits about this coming out soon.

there are 3 possible interpretations.

1. use the entry dates as listed in your plan . eg if immediate, then everyone who has not completed 12 months is treated as 'otherwise excludable'

2. use the statutory excludable definition - ignore the plans entry dates and treat as excludable anyone who hadn't entered the first day of the plan year or 6 months after meeting the age 21 and 1 year of service.

3. this is one I tripped across somewhere. supposedly the person who wrote that part of the regs intended this to be read, at least I gather, as the first day of the plan year or 6 months after the first day of the plan year.- in effect 2 entry dates.

now, when you say the system looks at strictly 18 months, are you saying it is ignoring the first day of the plan year? I though that was working at 6.0. I don't know about 7.0.

you can always override the census fields, so that is a workaround, it should only involve those ees who have worked less than 18 months, so I guess there is a workaround depending on how you interpret the regs. but thanks for the warning or reminder or whatever to be on guard for.

[Guest Tbrown]

Tom,

My research came from both the regs and Sal Tripodi's interpretation, but I agree it is vague and you could receive 5 different answers if you asked 5 different people. The example that we had was a plan that allowed immediate entry for 401(k), but 1 year for profit sharing and match. There are several employees that work under 1000 hours a year and the plan sponsor wanted to give them the opportunity to defer, but did not want to match or make profit sharing (top heavy is a whole other issue). What Relius appears to be doing is excluding someone for 18 months from their date of hire, regardless of the years of service or entry dates. Our position was that we can continue to disaggregate these employees each year if they never meet the statutory limits.

I discussed this at length with Corbel and they agreed that Relius was doing it incorrectly and would add that to their list of items to change. I just don't expect it to be very high up on their list.

By the way, I downloaded your notes on the Nondisrimination Module. I'm very impressed. I did notice that on page 18, you state that there are not many plans that require cross testing and are top heavy and have employees who are eligible to defer but fail the waiting period for a ps contribution AND receive a top heavy minimum. At the time you wrote this, that was probably true, but with Safe Harbor 401(k)'s and EGTRRA, I think we will see alot of these. I have written 15 documents in the last 2 months, and 6 of them will likely fall into that category (including the one mentioned above).

Tim

[Tom Poje]

Tim:

you are correct that ees who got into the plan because of immediate eligibility but never worked 1000 hours are treated as includable even after 18 months. of course the work around is to note them and override the stat exclusion field every year. hopefully that is not a ton of people.

you are correct, my nondiscrim notes need to be updated.

top heavy issues are going to be real interesting. in 2002 if an ee receives a contribution you are going to have to give him the gateway minimum, so the issue is even more complex.

it will be fun stuff by the end of 2002, won't it?

[Guest Tbrown]

I forgot I wanted to mention another issue in 7.0 and 7.1 (although it may have been a problem in 6.0, I'm not sure). If you have a plan that uses the first day of the plan year as the only entry date and it is plan entry date NEAREST, forget it for now. Relius is not backing up to the earlier entry date.

Example: 1 year wait, entry date nearest, 1/1 is entry date

Hire date: 3/15/2000, met entry on 3/15/2001, nearest entry is 1/1/2001. Relius gives the "met entry requirement as of" date correctly, but will not revert to the earlier entry date. Will not enter them until 1/1/2002. They added this one to their fix list.

Tim

[Guest Gordy]

TOM: Where are your "notes on the nondiscrimation module"? Also, is there another program out there? Seems like this one is prone to error and expensive. We also notified Relius of the problem.

[Tom Poje]

here they are. sorry I haven't updated them recently, but the basic concepts hold.

[Guest Tbrown]

Gordy,

As to your question about other software products, I'm not sure you will find anything that meets your needs better. My exposure has been limited to Relius, Datair, FDP and Trustmark, and Relius is hands down better than the other 3. Typically Relius has it's quirks, but they aren't normally major problems. And when a major problem comes up, they usually get it corrected quickly. Many users of other systems liked their simplicity and Relius is anything but that. But you also are able to do alot more with it than other systems. Also, it has been getting better and better with each major release. In my opinion, some of the shortcomings of Relius came about because it was designed first and foremost as a daily system.

Tim

[Guest Gordy]

Tim and Tom:

Thanks for your responses. Your help is appreciated.