cross testing & maxing out

[Chippy]

In a cross tested 401(k) profit sharing plan with two groups, partners and everyone else. Is it possible for the employees in the partners group to receive a different percentage in order to max each of them out for the year. As an example, partner A deferred 5% and received SH nonelective of 3%. He would receive a p;s of 12%. Partner B deferrs the max, receives the 3% SH, so his PS contribution to max out would be 22,400 or 10.18%. Is this possible as long as the plan passes all testing? I tried using the contribution optimizer in Relius and this is what it did. Just wanted to see if this is allowed.

[AndyH]

Yes, but the document would need to allow for different allocations for different people. Some do. Some do not. You need to follow the terms of the document. But, can it be done? Yes.

[Tom Poje]

legally it is certainly possible

of course you have to follow the terms of the document, you can't simply 'give' one HCE 10% and another 20% or whatever %s they turn out to be.

thats why administrators assign people to different groups either by name or, if possible by position.

by 'name' may cause issues with some IRS agents for it may look like you have a CODA rather than an actual profit sharing contribution - but in the situation you described, it shouldn't be a problem as they are simply maxing out at the limit.

gee whiz, nothing like responding at the same time as Andy the expert

[AndyH]

Brilliant!

[rcline46]

In my opinion, following the bouncing ball. Group allocations say the contribution is to the group and allocated in ratio of pay. What if your contribution just happens to take some in the group over the 415 limit? Now go to the document and find out what you do when someone exceeds 415. The document should permit you to reallocate the excess.

Since the group is all that is involved in this allocation, reallocate the excess in the group only, based on pay. Relius does this very nicely. I think this fits in the document and is acceptable.