Catch Up Contributions & Avg Benefit % Test

[flosfur]

Are Catch up contributions taken into account when computing the Average Benefit % Test?

[Mike Preston]

No if testing on annual basis. Prior year amounts (with earnings) ARE included if testing on accrued to date.

[flosfur]

No if testing on annual basis. Prior year amounts (with earnings) ARE included if testing on accrued to date.

Why the different treatment just because the testing method is different? Is this a word of mouth or a written guidance? If written, do you have the cite?

[Tom Poje]

because 1.414(v)-1(d)(3)(ii) says catch up from prior year would be included in the account balances taht are used to determine avg ben percentage if allocation from prior years are taken into account.

but mostly,because Mike says so.

[Mike Preston]

You got that right.

[MWeddell]

No if testing on annual basis. Prior year amounts (with earnings) ARE included if testing on accrued to date.

Why the different treatment just because the testing method is different? Is this a word of mouth or a written guidance? If written, do you have the cite?

I agree with the prior responses. Regarding why the regulations provided that rule, the IRS did not permanently want to require recordkeeping systems to keep catch-up contributions (and investment earnings on them) as a source separate from the regular pre-tax deferrals.