Minimum gateway

[Guest SPOT]

Can Davis Bacon contributions made to another qualified plan (multiple employer plan) be used to satisfy the minimum gateway requirement in another employer sponsored plan? In the past these contributions were used to offset the integrated profit sharing allocation, and now the employer is looking into a cross tested allocation. I want to make sure the davis bacon contributions can be used to satisfy the minimum gateway requirement, the rate group testing and the ABT.

[ERISA1]

I've been working on this question too. So far, all I can find is:

1. Davis Bacon contributions can be used as QNEC's up to 10% of compensation; i.e., they can be used for ADP or ACP testing. I don't think there's a restriction in the event the contributions are made to another plan.

2. Letter Ruling 7108186900A, dated 8/18/71 (pre-ERISA, but not pre-Code Section 401(a)(4)) says that you can count contributions to another plan in running discrimination testing.

I hope others might have something they can add to this topic.

[Tom Poje]

this article might help, though no cites are given

http://benefitslink.com/modperl/qa.cgi?db=...bacon&id=10

at 2006 ASPPA conference the IRS indicated that QNECs could not be used to satisfy the gateway (only the SHNECs could be used for extra duty)

[Blinky the 3-eyed Fish]

If they are not classified as QNEC's, they can be used in nondiscrimination testing.

[AndyH]

I agree, as far as pension administration is concerned, but the last time I looked at this I was concerned about some general rule about these contributions not being allowed to offset another benefit. I'm not sure how that should be interpreted but I would consider it an open issue. These contributions are in lieu of pay, so why should pay justify benefit disparity?

Just a tired post-Series rambling.