Guest carsonv Posted February 26, 2004 Posted February 26, 2004 I have a 401(k) plan that matches .50 up to 5% of deferrals. There are 2 HCE's, the owner and his son. The owner is on disability and has no comp or hrs for 2003. He is not terminated and may work part time in the future. The son has comp for 2003 and defers about 12%. Should the owner be considered in the ADP/ACP test? If he is included in the test, they pass....if not included they fail. Any help would be appreciated
Guest Mbrockway Posted February 26, 2004 Posted February 26, 2004 Consider this.... defer $0 out of $0 comp....is the ADP 100%? It is a reasonable arguement. The IRS is silent on this issue. You would be better off taking the conservative approach and treat the HCE as ineligible.
Archimage Posted February 26, 2004 Posted February 26, 2004 I don't even think it is a reasonable argument. It is mathematically impossible to divide a number by zero. Also, you cannot be eligible to defer if you have no comp to defer from. IMHO, you should not include them in the ADP test.
Blinky the 3-eyed Fish Posted February 26, 2004 Posted February 26, 2004 If he is included in the test, they pass....if not included they fail. Carson, I defy you to tell me how him being included in the test makes the plan fail or pass. Math teachers around the world would cringe at such a statement. $0 / $0 is not 100% and is not 0%. Jim Holland at the IRS has stated many times, and that same sentiment has been reiterated many times as well on these message boards, "no compensation, not in the test." See, as I was posting this Archimage reiterated it again. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Guest Mbrockway Posted February 26, 2004 Posted February 26, 2004 Refer to Chapter 11, Part B, 7a. of the 2004 ERISA Outline.
Archimage Posted February 26, 2004 Posted February 26, 2004 I agree with Sal that there is no official guidance. However, I completely disagree with Sal that zero divide by zero is 100%. It is just not mathematically possible. As Blinky previously stated, IRS officials have publicly commented on several occassions that no compensation means they are not in the test.
Guest Mbrockway Posted February 26, 2004 Posted February 26, 2004 I am in agreement with the HCE not being included in the test.
Blinky the 3-eyed Fish Posted February 26, 2004 Posted February 26, 2004 If we are all in agreement, we should hold hands and sing. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Archimage Posted February 26, 2004 Posted February 26, 2004 But you have fins. Now that I think about it, how do you type?
TBob Posted February 26, 2004 Posted February 26, 2004 I assume that if he can grow a third eye, a hand and some fingers would be no problem.
Lynn Campbell Posted February 27, 2004 Posted February 27, 2004 zero divided by zero is "undefined" as the math majors say.
Tom Poje Posted February 27, 2004 Posted February 27, 2004 yeh, but since you could be dealing with actuaries the response is "What do you want it to be?"
Gilmore Posted February 28, 2004 Posted February 28, 2004 Assume the participant was eligible in the past, made no salary deferrals thus has no account balance. Now for 2003 they are not formally terminated yet have no compensation (disability, leave of absence, etc). Is this employee still counted as a participant for 5500 purposes despite not being in the ADP test? If yes, any suggestions from other Relius users on the easiest way to exclude from testing and yet still show up in the participant counts? We usually code the participant as "Eligible-Not Participating" and run the test. Then change the code back to "Continuing to Participate" and run the counts. Wasn't sure if there was a simpler way. Thanks.
PensionNewbee Posted March 4, 2004 Posted March 4, 2004 What do you do if you have an HCE/Owner who took no comp for cash flow reasons but worked over 1,000 hours???
Blinky the 3-eyed Fish Posted March 4, 2004 Posted March 4, 2004 "No comp, not in the test" covers all hours situations. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Guest AJR Posted February 4, 2005 Posted February 4, 2005 What if the Top Paid Group is elected? Should employees on Disability for the entire lookback year be included in the TPG determination? They had zero compensation during the lookback year but were not terminated.
Guest DTrom Posted February 4, 2005 Posted February 4, 2005 Wouldn't they be excluded from the count based on the fact that they had no hours of service?
actuarysmith Posted February 7, 2005 Posted February 7, 2005 Why is this post still going? I thought we all agreed that the HCE should be excluded from the test. Now, grab the hand of someone next to you and join me in singing kum bye yah.
Lori H Posted February 16, 2005 Posted February 16, 2005 what if the owner(100% in this case), received no comp, but "performed services" for the employer?
Archimage Posted February 16, 2005 Posted February 16, 2005 My answer does not change from my previous posts on this thread.
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