Different SHNE amounts for different NHCEs

[Gadgetfreak]

I have a new-comp plan (everyone in their own subgroup) with a SHNE. Doc says SHNE should be 'at least 3%'. There is one key/HCE and everyone else is NHCE. We calculated that to give the owner the max PS, we would need to give 1.42% PS to everyone else (plus the 3% SHNCE) which happens to be the minimum required for the MCG test (4.42%).

One of the NHCEs terminated before year-end and is not entitled to a PS per the Doc. Therefore, they would only get the 3% SHNE but everyone else would get the 3 + 1.42 = 4.42%. Can you guess my problem yet ?

The MCG fails because of this one person. She is included in the MCG because she is entitled to an SHNE but, because she is terminated, doesn't get a PS. What do I do?

I can make the SHNE 4.42% for everyone since the language says 'at least', right? The problem is that it makes that extra 4.42% 100% vested. Do you agree with that?

But, do you think I can give that one NHCE a 4.42% SHNE and everyone else gets the 3% SHNE and the 1.42% PS? That would mean a different SHNE for different people.

Thanks in advance for any advice.

[Tom Poje]

anyone who receives a nonelective contribution (and a SNHEC is a nonelective) is entitled to the gateway. thus, the individual who terminated must be provided the gateway, otherwise you can't cross-test. now, the document can certainly say a SHNEC of at least 3%, and thus there is nothing to stop you from providing a greater % to all participants.

hopefully, the document also contains gateway language, which should say you would bump up anyone who needs to be bumped up. then you would have to have 'extra' 100% vested amounts. if the document does not contain gateway language, then you could put in a corrective amendment to provide the terminee the required amount (assuming you are still within 9 1/2 months of plan year end.