jaemmons Posted February 7, 2003 Posted February 7, 2003 Plan has dual eligibility requirements which allow for deferral immediately but maintains a 21/1 for employer discretionary $'s. Plan is cross-tested. There are a handful of employees who must receive TH min since they were eligible to defer. As such, they are being given the minimum gateway (1/3 of highest HCE allocation %). Question: Can I include those who receive TH only in my EBAR testing, even though they are not yet eligible for the employer cross-tested contribution??
AndyH Posted February 7, 2003 Posted February 7, 2003 Absolutely. In fact, they must be included unless they are statutorily excludable.
jaemmons Posted February 7, 2003 Author Posted February 7, 2003 Some of them are but some are not which is what is causing me some confusion.
Mike Preston Posted February 8, 2003 Posted February 8, 2003 AndyH has it right, as usual, but I think there is a clarification needed. The employer contribution is included in the a4 testing for all of the employees. The only question is whether the plan is being restructured to test one group separately from another. Let's assume the plan is being restructured into two groups, one which includes those who are statutorily eligible, the other includes those who are not statutorily eligible. Fine. When doing the test, under a4, of those that are statutorily eligible you will include these contributions. Similarly, when testing those who are not statutorily eligible you would also include these contributions. Usually, however, the testing for those who are not statutorily eligible is trivial because there are no HCE's in that group. Of course, care must be taken if you have an HCE in the non-statutorily eligible category.
Blinky the 3-eyed Fish Posted February 10, 2003 Posted February 10, 2003 Another note, if you are restructuring the plans to those that are and are not statutorily excludable, you do not have to give the gateway to those that are statutorily excludable. They only need to get the top heavy minimum. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
jaemmons Posted February 13, 2003 Author Posted February 13, 2003 Thank you to everyone who responded. However, this plan has a wrinkle I did not include. EE's can defer after immediately after DOH, but need to meet one yos and age 21 to receive a match and profit sharing. Since the plan is top heavy, I used the match (which is 100% up to 3% of comp) to apply towards th mins. However, there were 4 ee's who did not defer and do not have one year of service (are 21 though) and thus are not eligible for the match and profit sharing. Since they are eligible to defer they must receive a 3% top heavy. All other ee's receive the top heavy through the match, and receive an allocation of the cross-tested profit sharing. Also, the plan satisfies the gateway requirements. Since the four ee's who received a top heavy were not eligible for profit sharing (did not meet 1 yos) can I include their top heavy allocation in the general test? They can be statutorily excluded, but I need two of them to pass rate group testing. Do these additional facts change anyone's opinion. I included them in the 401a4 testing, since they did technically receive an allocation of employer nonmatching dollars, but does anyone disagree with this. thanks
Tom Poje Posted February 13, 2003 Posted February 13, 2003 IfI understand you correctly: You indicated that you need 2 of the ees to help pass testing. Therefore, that implies you are will not test otherwise excludables separately, so all ees and all contributions will be included in test. This will also require increasing the top heavy only ees to cover the gateway.
Guest lforesz Posted February 13, 2003 Posted February 13, 2003 Hi, When reading the final regulations, I can see that if a plan benefits employees who have not met the minimum age and service reqs of 410(a)(1), this group may be tested separately under a4 and need not be given the gateway even if they receive a top heavy minimun contribution. Section 410(a)(1) conists of two parts 410(a)(1)(a), one YOS and 21, and 410(a)(1)(B), age 21 and 2 YOS with 100% vesting. If I read the final regs literally, this would say that if a plan has a 2 YOS/100% vesting for the profit sharing, and all other receive a 3% top heavy, anyone with less than 2 YOS need not be bumped up to the gateway? Does anyone know if this was the intent? Any thoughts?
Blinky the 3-eyed Fish Posted February 13, 2003 Posted February 13, 2003 Without looking at the cites, I don't agree with this. My understanding in a cross-tested plan is that anyone who benefits under the plan under the nonelective portion (cross-tested alloc, safe harbor nonelective, TH contribuiton) must receive the gateway, EXCEPT, if the person is statutorily excludable and the testing is performed excluding the statutorily excludables. Thus, someone who is not statutorily excludable, received a top heavy nonelective contribution but has yet to meet the 2 year eligiblity requirement still must get the gateway. I have never thought about it until now, but I presume a similar participant whose TH min was satisfied through the matching contribution would not need to get the gateway. Doesn't seem to make sense, but I don't know of anything to refute this. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Mike Preston Posted February 13, 2003 Posted February 13, 2003 Without looking it up, I believe that the ability to test statutorily excludable versus not statutory excludable only may use the 1 year period, not the 2 year period.
Guest DFerrare Posted February 13, 2003 Posted February 13, 2003 Lori F, Otherwise excluable employees are defined in 1.410(B)-6(B)(3) which states"....applied without regard to section 410(a)(1)(B)..." David
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