Failed ADP Test - QNECs - Terminated EEs

[Guest Ted Kowalchuk, CFP, CFS,]

For a 6/30 Plan Year End 401(k) plan with a failed ADP test, do EEs that terminated prior to 6/30/2006 receive a QNEC as part of the test correction process? Thanx.

[fiona1]

That would be determined by the plan document. There can be a plan provision that says an employee must be active at plan year end in order to receive the QNEC. It is also common to have an hours provision where an employee must work a certian number of hours.

[Guest Ted Kowalchuk, CFP, CFS,]

That would be determined by the plan document. There can be a plan provision that says an employee must be active at plan year end in order to receive the QNEC. It is also common to have an hours provision where an employee must work a certian number of hours.

The Plan does have a last day of employment rule.

[Guest EPS2]

That would be determined by the plan document. There can be a plan provision that says an employee must be active at plan year end in order to receive the QNEC. It is also common to have an hours provision where an employee must work a certian number of hours.

The Plan does have a last day of employment rule.

What if the document does have a provision for terminated participants, but it is not clear on whether active participants get an allocation if they do not have 1000 hours. The adoption agreement says that for employer contributions other than QNEC to pass ADP, a participant must have 1000 hours...does this mean that those participants that do not have 1000 hours, but ARE employed on the last day get the QNEC?

If this is correct, then there will be participants with only QNEC allocations. No profit sharing.

I'm deducing that because the Adoption Agreement had that "other than QNECs to pass ADP" clause...we should be allocation to those actively employed participants with less than 1000 hours.

who knows?

AARRRRGGGGG!!!!!

[rcline46]

You need to check the Basic Document under corrections to ADP testing. The Corbel doc has 7 different QNEC options. Of course, these are modified by the Final 401(k) Amendment which had to be signed in 2006, so you need the amendment also.