Archimage Posted November 25, 2003 Posted November 25, 2003 Following facts: Plan is top heavy and ADP of NHCEs is zero and ADP of HCEs is 1.8. ADP refunds will be given to bring HCEs to an ADP of zero. Is top heavy minimum 1.8% or 0%?
Blinky the 3-eyed Fish Posted November 25, 2003 Posted November 25, 2003 The refunded deferrals are considered annual additions, so I believe the answer to be 1.8% even though 1.416-1 Q&A M-20 doesn't specifically reference annual additions. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Archimage Posted November 25, 2003 Author Posted November 25, 2003 That is my initial thought then I started drinking, one thing led to another, and I had lost confidence in my initial thought.
Brian Gallagher Posted November 25, 2003 Posted November 25, 2003 i thought the t-h minimum would be the highest rate contributed to a key employee. so if you had 1 key at 2.0%and 1 at 1.6%, the t-h would be 2% and remember, it is the rate to a KEY ee, not hce. Remember: two wrongs don't make a right, but three rights make a left.
Blinky the 3-eyed Fish Posted November 25, 2003 Posted November 25, 2003 Correct. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Archimage Posted November 25, 2003 Author Posted November 25, 2003 I mispoke in my first post. My highest HCE has 1.8%. Sorry for the confusion.
Harwood Posted November 25, 2003 Posted November 25, 2003 Why the ADP refunds if the NHCE/HCE gap is less than 2%?
Archimage Posted November 25, 2003 Author Posted November 25, 2003 The regs state the lesser of 2+ or 2 times. The lesser is two times zero.
WDIK Posted November 25, 2003 Posted November 25, 2003 401(k)(3)(A) (ii) the actual deferral percentage for eligible highly compensated employees (as defined in paragraph (5)) for the plan year bears a relationship to the actual deferral percentage for all other eligible employees for the preceding plan year which meets either of the following tests: (I) The actual deferral percentage for the group of eligible highly compensated employees is not more than the actual deferral percentage of all other eligible employees multiplied by 1.25. (II) The excess of the actual deferral percentage for the group of eligible highly compensated employees over that of all other eligible employees is not more than 2 percentage points, and the actual deferral percentage for the group of eligible highly compensated employees is not more than the actual deferral percentage of all other eligible employees multiplied by 2. (emphasis added) EDIT: Beat to the punch ...but then again, What Do I Know?
Tom Poje Posted November 26, 2003 Posted November 26, 2003 if, on the other hand ee is age 50 or older and plan allows catch up contributions then at least part of the deferrals would have to be treated as catch up, and these amounts are not counted when determining the top heavy %.
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