QNEC question

[BG5150]

I'm doing a QNEC allocation and I was looking at the slides from ASPPA's webcast "401(k) Testing for 2006".

My question has to do with "50% of the eligible NHCEs": Is that 50% of the NHCEs who are eligible to receive a QNEC, of 50% of those who are eligible in the ADP test?

In this case, there is a last-day rule for a QNEC to satisfy ADP test.

[Tom Poje]

both.

it is of 'all eligible' not 'all eligible for QNECs', otherwise the regs would have specified (or else I suppose you could do an end around the bottoms-up by specifying something goofy like "Qnec for those with less than 500 hours")

now, the 'both' comes in the fact the regs say you could use either "all eligible" or "all eligible employed on last day of the year" see 1.401(k)-2(a)(6)(iv)(B)

I'm not sure - I hadn't thought about it, but I guess it possibly implies the count could be different for the ADP test than for the ACP test since you could have an hours requirement for the match, and therefore you have 'less eligible employees'

[BG5150]

So if I have 10 NHCE's, and 6 of them are terminated, I cannot do a bottom-up since less than half of the NHCE's that are eligible for the ADP test are not receiving an allocation?