2 groups / corrective amendment for NHCE only?

[TPAnnie]

I have a 2-group cross-tested plan - Group 1 is MGMT (and all are HCE); Group 2 is Anyone Not in Group 1 (and is made up of about 25% HCEs).

The employer was hoping to only need to fund 1/3 HCE gateway amount, but due to failing tests, it's taking about twice that amount.

Is this allowed:

I allocate the minimum gateway amount and fail the testing. So then I apply corrective amendment increasing the allocation rate for ONLY the NHCEs in Group 2, keeping the Group 2 HCEs at the original allocation?

Is there any basis for this?

thanks!

Annie

[J Simmons]

If the plan year in question has ended, I think you'd need a Treas Reg 1.401(a)(4)-11(g) amendment to accomplish this, by splitting Group 1 in two, one for the 25% thereof that are HCEs and another for the 75% thereof that are NHCEs. But Tom Poje will shed more light on this.

[Tom Poje]

first, any corrective amendment has to be done within 9 1/2 months.

second, you are correct, if cross-testing you have to give the gateway before proceding any further.

after that, my understanding is the corrective amendment can go to one or more, your choice of employees, as long as it has substance and doesn't violate some other rule. you cant get 150% contribution to an individual, nor can you give a $$$$ to a 0% vested employee unless you vest that contribution., etc, etc. thus, (again my understanding) you could give a corrective amendment to just group 2 NHCEs. I thought the regs in -11g were fairly clear (unlike much of the other regs)

but then that still doesn't mean I understand them 100%

[TPAnnie]

Thank you both for your help! I appreciate it so much,

take care,

Annie