QNEC & PPD document...

[jquazza]

Document has three options: 1-Eligible Participants pro rata compensation. 2-Eligible Participants flat dollar amount. 3-under reverse allocation or similar method. it goes on describing the mechanism of bottom-up QNECs (max permissible contribution to lowest paid participant.

My question has to do with the "similar method", as this term is not defined in the document. Here is what I am trying to do:

401(k) is failing ADP and is Top Heavy. Employer does not want to contribute any more than he has to. There were no contributions other that the deferrals this year (and TH minimum obvioulsy.) 2 out of 5 HCEs are non-key EEs (doc excludes HCEs from QNEC allocation.)

If I provide a 3% QNEC to all NHCEs, then I have problems with my Top Heavy minimum as on HCEs get it.

Would it be acceptable under "similar method" to provide 3% QNEC to 3 lowest paid NHCEs and regular nonelective TH minimum to all other non-key EEs?

[Earl]

I think it is ok, but what I do is try to come up with a definition of the group that would be getting the qnec (as their TH min). (or allocation methodology) Rather than saying "Bob, Sam and Sally get the qnec..."

normally I would "give to the lowest paid until he reaches 415 limit", so maybe "give to lowest paid until he reaches TH min then to next lowest paid until he reaches TH min, and so on..." would do it.