help for an HCE who is habitually receiving refunds.

[Lori H]

a hotel management firm offers its thousands of employees a 401k with no match. its kind of a "its there if you want it" plan. of the 1400 plus eligible NHCEs only 96 are actually participating. so obviously the miserable participation rate forces the sole participating HCE refunds each year. last year he was only able to defer 3282.19 and that includes the 2000 catch up. his comp was 97000 and he receives a refund each year. obviously he is not real happy about it. his refund for 2003 was 2030. anyone have any suggestions for this poor guy. he is 64 years old this year and i am real sympathetic towards his situation, but im strapped by the Nondiscrimination rules. outside his IRA does he have any options? would a private letter ruling be a waste of time? could Portman-Cardin savers match legislation benefit him if it is passed? on behalf of this lonely HCE in a 401(k) filled with non participating NHCEs, i thank you.

[mbozek]

How about a Nq deferred comp plan as a wrapper which would allow the deferral of the excess ee contribution in a NQ plan. Next year the HCE will be >95k so maybe he should reduce his salary or change the comp def to get him below the HCE threshhold. Also he is eligbile for a 3k catch up in addition to the regular contribution for 04. He should check into eligibility to contribute to an HSA. I dont think there will be any tax legislation this yr.

[Lori H]

HSA????? i dont think i am familiar. what would typical eligibility be for one?

so if he kept his comp under 90,000 in 2004 he would be go into NHCE status for 2005. or is the threshold for 2004 95,000?

i will run the non qualified idea by the employer.

thanks a lot.

[mbozek]

HSA is the new medical savings provision in the Medicare amendment act.

[MGB]

If this is the sole executive, wouldn't he still be an HCE even with the lower comp?

[R. Butler]

If this is the sole executive, wouldn't he still be an HCE even with the lower comp?

Unless he is a more than 5% owner, why does the fact that he is an executive make him an HCE, assuming he won't earn $90,000 in the prior year?

[JanetM]

What if you used top 20% as HCE group? Would that help?

[Earl]

Not if he is THE highest paid employee.

How about reducing his comp so that he is an NHCE, then the plan could be amended to be cross tested and he could be in his own allocation group. Once he is an NHCE the company could fund his full reduced comp amount and then some as a Profit Sharing contribution.

Just watch out for writing this down because it is actually a cash or deferred election.

[Lori H]

he is not an owner. a general manager of a hotel. i do not believe the standardized document has a top-paid group election. there were 2 hce's in the 2003 plan year. he was not the highest paid. this year there are 3 hce's. with the addition of the third non-participating hce, i would think this should help his cause some. the company will never match or make a profit sharing contribution. i'll see if he wants to reduce his income to reclassify him as an nhce thanks for your responses.

[Brian Gallagher]

How 'bout adding a Safe Harbor Match? I doubt the participation level is so low becasue of the no match.

With the SH match, the plan is deemed to satisfy ADP/ACP.

Any Top Heavy issues w/ this plan?

[WDIK]

the company will never match or make a profit sharing contribution.

Sounds like that is not likely.

[Brian Gallagher]

oooops. That's what I get for not reading the entire message.

but i believe i'm right in that he won't max out percentage-wise, but he will dollar-wise.