3 rate groups...

[K-t-F]

When you have 3 rate groups, how does that affect gateways?

Thanks!

[Blinky the 3-eyed Fish]

Simply, for a cross-tested DC plan the gateway is the lesser of 1/3 of the highest HCE accrual rate or 5%. How many rate groups there are has nothing to do with it at all.

[K-t-F]

What is the benefit of more than 2 rate groups.. nothing?

2 Doc's in group 1... $200K+ each

1 younger Doc in group 2... $200K+

all the rest NHCEs in group 3

[Tom Poje]

assume testing interest rate of 8.5%

if age NHCE = 25

and young HCE is

40 that is 15 year difference in age

1.085 ^ 15 = 3.4

so if you give NHCE 5% the young HCE could get

5 * 3.4 and still be in the rate group. that is 17%

but 17% * 210,000 is only 35,700 , short of the max 42,000.

so there is your advantage. you could give more to the older HCEs, 5% to the NHCE and somewhere imbetween to the young HCE

(and still have a chance at passing testing)

but at least that gives you a chance since you would have at least one NHCE in the rate group.

you would probably need more and unless you have enough young NHCE you would probably have to reduce the young HCE even further

[AndyH]

Or the doctors might want different contribution levels. One might want to contribute $40,000 while the other might want to contribute a 1948 Pontiac. You wouldn't want to give the NHCE either of those two, would you?

(I once handled a doctor's plan with assets that consisted entirely of loans, accrued interest on loans, and a 1948 Pontiac).

[Belgarath]

Knowing how you feel about these things, I'm surprised you didn't convince him to purchase a Ferrari 412i. Yes, they actually did make a 412i model!

[AndyH]

Such a car should be valet parked at the Hotel California. You know, you can check out any time you want, but you can never leave.

[Belgarath]

Wow! The fact that you made this reference and the fact that I understood it is exposing our advanced ages. Still, as the old saying goes, getting old may ####, but it sure beats the alternative.

I realized last night that the true core of a Bosox fan's soul never changes. The fact that they finally won a world series doesn't matter. After they went ahead 4-0 in the first inning last night, I knew - KNEW! - that they were going to lose the game.

[AndyH]

That sure was painful.