New Comparability Allocation Groups

[401_4_ever]

Does anyone have any experience in naming allocation groups for a new comparability plan something along the lines of "every participant" employed by the end of the plan year? The ultimate goal is for each employee of the company (less than ten total) to make up their own individual allocation group. I have done this once in the past, and named each employee into the plan document. Of course, the problem with this is that if one person leaves or joins the company, a brand new amendment must be passed.

It is my inclination that we wouldn't receive a determination letter for simply listing that every one employed is their own allocation group. If anyone has any experience in this, or even better, a cite to a reg or announcement regarding this issue would be much appreciate.

Thanks in advance to everyone!

[Blinky the 3-eyed Fish]

It is my inclination that we wouldn't receive a determination letter for simply listing that every one employed is their own allocation group. If anyone has any experience in this, or even better, a cite to a reg or announcement regarding this issue would be much appreciate.

Your inclination is incorrect. The IRS has approved VS documents with such language. Thus an individual submission should receive the same acceptance.

[Tom Poje]

google up LRM #94.

here is probably the most relevant part:

each eligible employee will constitute a "separate allocation group". only a limited number of allocation rates is permitted.

For plans with only one or two eligible NHCEs, the allowable number of NHCE allocation rates is one. For plans with 3 to 8 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed two. For plans with 9 to 11 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed three. For plans with 12 to 19 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed four. For plans with 20 to 29 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed five. For plans with 30 or more eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed the number of eligible NHCEs divided by five (rounded down to the next whole number if the result of dividing is not a whole number), but shall not exceed 25.

in addition, there is a requirement that the number of eligible NHCEs to which an allocation rate applies must reflect a reasonable classification of employees.

in other words, if you have less than 9 NHCEs it looks like you would be limited to 2 allocation rates, though you have a number of allocation 'groups'

[AndyH]

Tom, thanks for that insight.

What is the context of that LRM? What is the context of those requirements? Are they now allowing cross tested prototypes? Are they saying that VS plans must also meet those ratios?

[Tom Poje]

Andy:

I depend on people like youto explain to me how LRMs work and stuff like that in regards to documents.

If I understand things correctly, if you go individually designed you wouldn't have to worry about it (expect perhaps to the extent you can see what the IRS thinking is on the issue) but after that I get all muddled how they apply to prototypes and stuff.

[Guest merlin]

Andy,

The ratios will apply to volume submitters as well, per Corbel.

[AndyH]

Merlin, "will" ? When, who, how? Corbel's site should help though, thanks.

Tom, you can't tell me you were just one day surfin the web for LRM's! That would be a bit like reading the C-3 prohibited transaction study materials for the heck of it or spending the day at the beach reading a thesaurus. Oh, I get it, you were researching a song and something rhymed with LRM. Can't imagine what though.

p.s. eminem?

[Tom Poje]

Andy:

I belong to Losers Really Matter and thats what showed up...

seriously,

I wasn't looking for LRMs. This one either appeared on one of the daily BenefitsLink news letters a few weeks ago or else it showed up in one of the emails I received because I am on one of the ASPPA committees.

[AndyH]

Well, if volume submitter plans can no longer have individual groups then I would sure like to know more about such a development.

[Leopurrd]

me too! This could really change Cross-Tested plan results....

[Guest merlin]

Andy,

We use Corbel's volume submitter plan, so I put the question to them through their support link. The answer was that the LRM language will be applied to vs plans as well as M&P plans. A local attorney who sponsors his own vs plan got the same answer. He also has gotten the IRS reviewer's list of comments on his plan. He will get back to me after he's looked at the list.

As a practical matter, is this that big a deal? Between the minimum gateway requirements and employee relations considerations ("These 3 guys are all supervisors. I can't give them all different contributions!") don't the myriad allocation classes usually reduce to maybe three or four levels anyway?

The Corbel rep also said they expect something from the IRS precluding the naming of partners in their own allocation classes. The deemed CODA issue formally addressed at last?

[AndyH]

Thanks for the info, Tom and Merlin. This appears to be a 10/2006 update to a 2005 LRM, so you are certainly cutting edge cross testers!.

Merlin, I agree with your comments but if you read the LRM there are requirements being added that are more restrictions than technical problems.

[Guest merlin]

The more I read it, the more confusing it is. The restrictions seem to be more operational than formal. Wouldn't that more properly be the subject of a regulation or ruling? Anyway, I've punted it over to the ASPPA GAC.

[AndyH]

Agree completely.