Eligibility Amendment

[Alex Daisy]

New Comp Plan for 2007. Two Owners & 15 HNCE's.

Owner # 1 has 2007 compensation of $20,000.

Owner # 2 has 2007 compensation of $100,000.

Can someone clear up what tests need to pass in order for a New Comparability Plan to meet all Non-Discrimination Testing requirements, specifically the Plan itself, and then each HCE Rate Group.

Can the Plan pass the Gateway test and the Ratio % test, but fail the Average Benefits Test and still pass all Non-Discrimination Testing requirements?

What about the Plan passes the Gateway Test, Ratio % test, and Average Benefits Test, but one HCE Rate Group fails the Overall Ratio Test? Is this allowed?

Thank You in advance.

[Mike Preston]

New Comp Plan for 2007. Two Owners & 15 HNCE's.

Owner # 1 has 2007 compensation of $20,000.

Owner # 2 has 2007 compensation of $100,000.

Can someone clear up what tests need to pass in order for a New Comparability Plan to meet all Non-Discrimination Testing requirements, specifically the Plan itself, and then each HCE Rate Group.

Can the Plan pass the Gateway test and the Ratio % test, but fail the Average Benefits Test and still pass all Non-Discrimination Testing requirements? {1}

What about the Plan passes the Gateway Test, Ratio % test, and Average Benefits Test, but one HCE Rate Group fails the Overall Ratio Test? Is this allowed? {2}

Thank You in advance.

{1} Yes

{2} Don't know what the "Overall Ratio Test" is. With 15/17 being NHCE concentration percentage, the mid-point of the safe and unsafe harbors would be a bit less than 25%. Is that what you mean?

[Alex Daisy]

Mike: I meant the Individual Rate Group (For the HCE's) Ratio Percentage Test.

Let me explain with numbers:

Accrual Rate Analysis:

Gateway: Passes

Ratio Percentage Test: 100%

Average Benefit Test: Failed

Rate Group Analysis for the HCE's

One HCE Passes Ratio % Test

The other HCE Fails Ratio % Test

Is this OK, or do both HCE's need to pass the Ratio % test?

New Comp Plan for 2007. Two Owners & 15 HNCE's.

Owner # 1 has 2007 compensation of $20,000.

Owner # 2 has 2007 compensation of $100,000.

Can someone clear up what tests need to pass in order for a New Comparability Plan to meet all Non-Discrimination Testing requirements, specifically the Plan itself, and then each HCE Rate Group.

Can the Plan pass the Gateway test and the Ratio % test, but fail the Average Benefits Test and still pass all Non-Discrimination Testing requirements? {1}

What about the Plan passes the Gateway Test, Ratio % test, and Average Benefits Test, but one HCE Rate Group fails the Overall Ratio Test? Is this allowed? {2}

Thank You in advance.

{1} Yes

{2} Don't know what the "Overall Ratio Test" is. With 15/17 being NHCE concentration percentage, the mid-point of the safe and unsafe harbors would be a bit less than 25%. Is that what you mean?

[J Simmons]

If average benefit percentage test fails, then each HCE's rate group must pass the 70% ratio percentage test. If the average benefit percentage test had passed, then each HCE's rate group would have to pass the ratio percentage test, but only at the lower, mid-point that depends on the concentration of NHCEs among all tested employees.

[Mike Preston]

What the cute dog said.