QNEC question

[BG5150]

I need to get my NHCE's up by an aggregate of 11.51% to satisfy the ADP test. I'm doing a bottom-up QNEC for them. I have 8 NHCE's but two of them are terminated. I have two allocations, and I'm not sure if the first one is okay with the new rules. The NHCE's are labelled A-H and have descending comp (ie, A is highest, H lowest) and as it turns out G & H are the terminated people.

First one:

A 0

B 0

C 0

D 1.51%

E 5%

F 5%

G 0

H 0 total: around $6100

Second one:

A 0

B 0

C 0

D 2.51%

E 4.5%

F 4.5%

G 0

H 0 total: around $6300

Is the first allocation okay? I can do a bottom-up since no one is getting more than 5%. But the rule about nobody getting more than twice what some one else is getting: does that apply since no one is getting more than 5%? Or does that kick in if I'm doling out more than 5% to anyone?

Your thoughts are appreciated.

[Tom Poje]

I am assuming your document permits the allocation of QNECs as described.

the rule is as follows: A 5% (or less) QNEC is deemed not to be disproportianate, so it would appear either example you provide would be possible.

you case #2 is a good example of what can happen. 8 NHCEs but 2 are terminated.

NHCEs who are employed on the last: 6

so 50% of this group is 3 bodies.

the lowest rate for any 3 bodies (D,E and F) is 2.51%

so you could actually use twice that (5.02%) if you had allocated a larger QNEC to anyone.

thus you could have given

D=3

E=3

F=6 as well

again, assuming the document permits such an allocation.