Excluding HCEs

[Guest rgorman]

Plan written with three classes. Owner, former owner, all others. Former owner is gone. Owner's adult children now working for him. Cross Tested allocation not working with the adult children included. I would love to exclude them but since they were not around when the document was written they do not have their own class or were not written out of the allocation.

We are amending and putting them in their own class ongoing but this is an issue for the 2004 allocation.

Any other way to exclude certain HCEs (they are HCE only by attribution)? Only three HCEs in plan dad and 2 kids.

[AndyH]

Nope.

But you could pass by giving them the same percent allocation as the all others and test part of the group on a contributions basis using a technique called "restructuring". Search for "restructuring" or "component plan" testing if you are interested.

[Guest Ned Ryerson]

Unless the plan had a short eligibility requirement, this is a situation that should have been noticed last year by the TPA. It is a lesson in planning ahead.

Speaking of planning ahead, who wants insurance!!! You are going to die sometime!!!

[Tom Poje]

I suppose if you got real lucky and had immediate eligibility and no new NHCEs you could test using otherwise excludables.

and be careful about amending at this late date! if all you need is 1000 hours, amend quickly. if it is a standardized plan and all you need is 500 hours it is probably too late.

if you have last day provision, then you have plenty of time.

[rcline46]

For 2004 put children of owner in all other class for allocations if you haven't.

If they do not own stock personally, they are not an owner. They most definitely are HCEs by attribution. THey are KEY by attribution, but since they have to own something to be an owner, if they don't own it - presto - not in owner group!

[AndyH]

Ned, is your lack of color symbolic of you being on the "dark side"?

rcline, shirley you are not suggesting amending the plan retroactive to 2004, are ye?

[Guest Ned Ryerson]

Don't go Star Wars geek on me AndyH. My lack of color is symbolic though. It is the color of one's body after death, yet the money from insurance is green and can be exchanged for goods and services worldwide.

[ak2ary]

It seems to me that, depending on existing plan language you may be able to accomplish this. If the plan is written in such a way that the contribution for NHCEs is automatically increased to satisfy the gateways, then simply declare whatever contribution you like for the owner and zero for the all others group. By operation of existing plan language the NHCEs in the all others group will spring to the greater of the top heavy or gateway amount and the HCEs/keys (ie the kids) will stay at zero

[could be me maybe not]

Good point. A corrective 11-(g) amendment might also be needed, but you have a point.

[Blinky the 3-eyed Fish]

To be technical ak2ary, you would need to provide more than $0. To bump up to the gateway, one of the requirements is to benefit, so I suppose 1 cent will do, but not $0. Of course, then you need to hope the gateway minimum is sufficient to pass the testing.

[could be me maybe not]

....or you do an 11(g) amendment, right? Or not right? Whch is it? Huh?

[Blinky the 3-eyed Fish]

You are right as rain you monkey-faced genius.

[ak2ary]

I disagree.. the top heavy minimum will cause an allocation for the nonkey group and then the default plan language will increase it to the Gateway amount..even if the board resolution declares a zero contribution for the NHCE group....then an 11(g) if necessary

[could be me maybe not]

:angry: You disagree that I am monkey-faced or that I am a genius?

Where is that "Notify Moderator" button anyways!!??

[Blinky the 3-eyed Fish]

You assume it's TH.

[ak2ary]

If its not top heavy, its poorly designed

[AndyH]

If the plan was designed for the former owner and he is gone and the new owner is either a new employee or was an NHCE then it could very well be not top heavy for a while regardless of the design.