Cross testing Groups

[perkinsran]

we have a large medical practice with about 250 employees and 25 physicians. The company currently contributes 8% of pay for all employees. The 8% of pay will support a 20% of pay for the Doctors as a separate class.

However, some Doctors would want to contribute the max for themselves and some will not. Can we structure the HCE groups in single age increments to accomodate this? i.e Groups as follows:

Group 1 All NHCEs 8%

Group 2 HCEs age 35 8%

Group 3 HCEs age 36 20%

Group 4 HCEs age 37 15% etc. etc.

[Fredman]

some questions:

why do you want to use ages?

what happens next year when the 35 year old turns 36?

will they want a boost from 8% to 20%?

If you set it up like this, i think that you're setting yourself up to amend the plan each year to juggle the ages/percentages.

[Guest PLHart]

Why don't you create allocation groups for the Doctors by name?

[perkinsran]

We are trying to get as much flexibility with physician discretion without running into IRS problems. We know all the Doc could contribute $40,000 if Docs were one group and everybody else was another group. However, Docs salaries range from $150-$400 K. Since the docs are owners and share prorata in the 8% they are doing for everyone else, some can't afford to do $40,000 for themselves. Therefor, we are trying to get as much flexibility without raising IRS issues/concerns.

We first proposed breaking the Doc group into 5 year age brackets to give some flexibility. You still have the same issue with two Doc in those age brackets not wanting to do the same %. By ages, we are getting very close to a separate group for each Doctor and the Sal Tripodi ERISA Outline Book indicates "this may be a problem, but there is no offical word from the IRS."

If we break it into individual ages, I don't think we will have to amend the plan yearly because the % are determined at year end and are discretionary.

[Guest merlin]

You can't get much more flexible than classifying them by name,as PLHart suggests.

[perkinsran]

Has anyone ever broken it down to an individual level and gotten a letter from the Service?