More than gateway? How?

[Earl]

ER has a Cross Tested plan with about 10 EEs. Sells the clinic with the EEs and becomes a Public Speaker. After a time his old Admin Assist. comes to work with him again.

So:

2004 AA is rehired 10/15/04 and works only 245 hrs. Plan has 1,000 hrs for accrual. Plan is TH so she gets the TH min. X-tested so she gets to Gateway, 5%.

But she is older than him. Is she in the 401(a)(4) testing? (I think so.) So to get the guy a 20% allocation she has to get a 20% allocation. But the Gateway amendment only allow bumping up the TH to the Gateway.

Am I missing something? I think she has to get a regular accrual but under what authority? Do I need a corrective amendment?

Thanks

[Tom Poje]

I would say yes you need a corrective amendment based on your description.

depending on the comps, I would guess testing on an allocation basis and imputing disparity would result in an allocation slightly less than 20%

[could be me maybe not]

My obviously less evolved ESP could not sufficiently understand the facts pertinent to the situation.

[could be me maybe not]

That's it Tom, your next pension song, by Boston, "More than the Gateway" to the tune of "More than a Feeling" circa 1978.

[pmacduff]

CBMMN - how about "don't fear the gateway"...by the same band !

[Tom Poje]

well if I did that, I would use Frank Sinatra's "I did it my way"

[No Name]

Are you inferring that this is the same employer? Sounds like a new employer who just happened to have stayed in touch with a former employee.

[Earl]

I believe it is the same employer. Same EIN etc... Just sold off the clinic.

That might be a separate, also interesting, issue.

[could be me maybe not]

Why would a corrective amendment be needed? Why isn't this person simply eligible under the terms of the plan?

[Earl]

She is eligible, but she didn't meet the accrual requirements (1,000 hrs).

Its TH so she gets 3% because she is there on the last day. That is then bumped to gateway by the gateway amendment.

So coverage is not an issue. Non-discrimination testing fails so I have to give a higher contribution to pass. But I don't think the plan has a provision for it. So I think I need(ed) to amend by 9/15.

Of course this is a Sole Prop and I got the info after 9/15.

[Guest trumpy]

Earl -

When did the assistant originally terminate employment? Is there anyway to exclude her from plan participation based on breaks in service?

[Earl]

She was gone for about 16 months. July 03 - Nov 04.

(Isn't breaks in service a vesting, not eligibility, issue....?)

[Blinky the 3-eyed Fish]

Well first, you have until 10/15 to amend the plan under -11(g) (assuming this is a calendar year plan).

BIS is also an eligibility issue. Your document spells it out, but if it requires the person to work a year of service after rehire (i.e. 1,000 hours 11/04 - 11/05), well then she is back in the plan retroactively. If she meets the YOS, you are then stuck with the same problem you have now though, so careful. That retroactive entry is trouble. It appears she is working sufficient hours to meet the YOS.

[Earl]

I do not use the 1 year hold out rule and, as you say, I would be in the same position.

Thanks for the 10/15 tip. I thought it was 8 1/2 months....

I'M SAVED!

[could be me maybe not]

Welcome back to the fishy. Thought you'd pulled a Mike P on us.

Now that the facts are clearer, yup, an amendment by 10/15 is the answer.

As Tom said....

[Mike Preston]

Hey, I resemble that remark!

[could be me maybe not]

You may resemble my remark, but you could not be the pulchritudinous board member that I am.

[Mike Preston]

I'll settle for unprepossessing.