Monica Barnard Posted January 31, 2008 Posted January 31, 2008 Cross tested plan with doc and 2 younger ees has passed testing for last 5 years. 2007, newly eligible employee throws a monkey wrench into things. Doc is age 52. Newly eligible is 60. 2 rate groups are established in plan doc. If plan is amended to add third rate group, with separate allocation for new participant, 401(a)(4) passes. Problem is how to categorize rate groups. Doc is easy. Of the 3 ees, 1 is receptionist and other 2 are nurses. One of the nurses is the problem child. Any suggestions?
Monica Barnard Posted February 1, 2008 Author Posted February 1, 2008 I meant on how to classify the newbee. Could I have a class for employees within 5 years of NRA?
Mike Preston Posted February 1, 2008 Posted February 1, 2008 How can you redefine groups for a plan year that has concluded? BTW, I really don't understand why putting this person in their own group helps you satisfy the test. Can you provide some numbers?
Monica Barnard Posted February 1, 2008 Author Posted February 1, 2008 Doc age 54 150,000 Receptionist 45 24,230 Nurse 1 44 24,960 Nurse 2 61 18,770 When I initially ran 401(a)(4) without nurse 2, test passes with doc getting 12.33% and other 2 ees getting 7%. when I add nurse 2, testing doesn't pass until nurse 2 is receiving 23.75%. Any help on this is greatly appreciated!! Monica
Mike Preston Posted February 1, 2008 Posted February 1, 2008 I just don't understand what is going on. Does your system show that you pass the average benefits test? Do both of your younger folks show up in the good doctor's rate group? If the answer to both is "yes" (as I suspect it is) then what is failing? If you can share more numbers, that might help.
AndyH Posted February 1, 2008 Posted February 1, 2008 Agreed; it must be an average benefits test issue. Both of the original NHCEs should be in the doc's rate group, but not Nurse Ratchid, so the R/P would be only 66.66%, not 70%.
Bird Posted February 1, 2008 Posted February 1, 2008 I agree, you can't create a new rate group in 2007 at this point. You can do a corrective amendment but I doubt that's necessary... ...rate group testing should pass with 2 out of 3 getting benefits comparable to or greater than the doc, and I'd guess the ABT would pass also unless the doc (only) had 401(k) contributions (and that raises other questions). But then you can just give all three a little more and you should be ok. Ed Snyder
Kimberly S Posted February 1, 2008 Posted February 1, 2008 BTW, I really don't understand why putting this person in their own group helps you satisfy the test. Can you provide some numbers? Putting the person in their own group allows you to increase just the one rather than all three NHCEs. But I agree that you probably can't do it after the fact. And it sounds like you're going to have a hard time justifying a business reason for it.
Guest greybeard Posted February 1, 2008 Posted February 1, 2008 A couple of things to consider. When did nurse 2 enter? BOY or Mid Year? Does plan exclude Comp PTE? Assuming you are testing on a benefits basis. Would it be less expensive to test on an accrual basis? There are probably many other ways to test.
AndyH Posted February 1, 2008 Posted February 1, 2008 Good points (The Burrows/Preston rule is in effect) Another thing: Why doesn't Doc give himself a raise? (if you don't mind throwing a few bucks into the Lock Box) Otherwise, that's the best technique.
Mike Preston Posted February 1, 2008 Posted February 1, 2008 I think it is merely the Burrows rule, but it is APPLIED by Preston all the time! But not in this case. Aren't we 180 degrees the other direction? IT ALREADY PASSES THE WAY IT STANDS unless there is some material fact undisclosed.
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