HCE determination

[ccassetty]

My question is on changing the top 20% or calendar year elections in determining HCE status. I know that during the RAP we had a "free ride" on making these elections and could utilize whatever gave the best results, then amend the document accordingly at the end of the RAP. However, most plans have already been amended, so the question is, when changing these elections going forward, when must the plan be amended to reflect those changes. Has the IRS ever provided any definitive guidance on this?

Thanks to all who respond!

[Blinky the 3-eyed Fish]

There is no specific guidance that I know of. The issue in my mind is a 411(d)(6) issue as to when the HCE definition can be changed. One simple example would be if a PS plan with allocation groups had one defined as NHCE's. If the top paid group election were removed from the plan after the right to the allocation was earned and people were moved from NHCE status to HCE status and received a lesser contribution, I think there would be a problem.

[ccassetty]

Thanks, that is an issue I hadn't thought of, but, absent that situation, I am wondering what the time frames would be. At an IRS Q & A a few years ago, the answer was prior to the beginning of the year being tested.

Follow up question. If the plan simply references 414(q) for its definition of HCE, what then? How are these elections made and do they still have to be reflected in the plan document?

Thanks!

[Blinky the 3-eyed Fish]

My understanding is the top paid election must be explicitly referenced in the document. However, I have seen a GUST approved document that had the paraphrased wording, "... top 20% if elected by the employer for a Plan Year." I really think this slipped by the IRS reviewer and have only seen it in the one document.