Calendar year data election

[AndyH]

I'm testing a 7/1/2003-6/30/2004 (large) plan and trying to determine who are HCEs. Under the plan's terms, service is measured on a plan year basis but compensation is defined as calendar compensation.

For 7/1/2003-6/30/2004. I seem to be able to use calendar 2002 pay to determine the HCE threshhold by using the calendar year data election of IRS Notice 97-45. There does not seem to be any documentation or amendment requirement to use this, except for consistency among plans and that the election, "once made, applies for all subsequent determination years unless changed by the employer."

Questions:

(1) Am I right that I would use calendar 2002, not 2003?

(2) This is still an option, right?

(3) How does an employer make such an election, i.e. is there any documentation requirement that I have not found and am unaware of?

Thanks for any help.

[Guest Doug Goelz]

Andy, if you are testing the 7/1/2003 to 6/30/2004 plan year, then your usual lookback year is 7/1/2002 to 6/30/2003 plan year.

Under 97-45, if you make the calendar year data election, you would need to use the calendar year beginning within the usual lookback year as the plan's "deemed" lookback year. Therefore, you would have to use the 2003 calendar pay for your test.

My understanding is that the choice to use the calendar year data election must be reflected in the plan document.

[AndyH]

Doug, why wouldn't that mean 2002, the calendar year beginnining with the lookback year?

I guess it's moot, since I do now see that it must be in the document. Thank you.

[Guest Doug Goelz]

The calendar year 2002 begins on 1/1/2002, and this is not within the lookback year of 7/1/2002 to 6/30/2003.