Termed Participants on Relius

[Guest IBlameTedBenna]

I am running a cross-tested 401(k) calculation for 2005. One HCE owner, 3 NHCEs. Top heavy plan, SH Matching with 500 hours/last day rule. If 2 of the NHCEs termed in early 2005 with less than 500 hours, although they deferred a small amount and will receive a match they should not be getting a profit sharing contribution from the employer. I am having difficulty with coverage testing. Any suggestions on how to pass testing?

[Archimage]

Since they had less than 500 hours, they are excludable from coverage.

[Tom Poje]

I'm leary of making an answer without being clear on the terminolgy being used.

you indicated 1 HCE, 3 NHCE (2 termed < 500 hours)

plan is cross tested, coverage is a problem.

there are 3 coverage tests - all eligible to defer so 401 k passes

all got safe harbor match, so 401m passes.

nonelective - you can exclude term w < 500 hours, so I would expect that to pass coverage as well.

If it is not, something is coded incorrectly. (e.g. on the status screen, the employee has something in 'reason not eligible'. if so, then I need further info to determine how things are coded and how to prevent this in the future. by the way, that is not an 'uncommon' mistake so dont feel bad if that is what it is.

now, avg ben % test - you have to include all contributions from all employees.

since 2 NHCE received no PS, I could see this test failing. but that is not coverage, that is part of the nondiscrim.

however, assuming the lone remaining NHCE has an EBAR >= to the HCE, I would expect that the plan to pass ratio % test since the other 2 NHCEs would not be included in the test. on the other hand, if you only provided a gateway minimum, then the EBAR might be less and you would fail.

(or dreaded 'bug in the software'. I have not run much at 10, but am pretty confident that Relius 9 is calculating correctly.