restructuring for ADP Testing.

[Lori H]

a 10 participant plan has a 6 month age 21 eligibility. It miserably fails the ADP n ACP. So we utilize the statutory minimum age/service conditions and it still fails. When calculating QNEC's, do the excluded participants under the statutory conditions receive a qualified non elective contribution?

[austin3515]

Yes.

Been a long time since I gave one word answer

[austin3515]

OK, spoke too soon - better check the doc to make sure a competent attorney drafted the doc to give you permission to do this. If not, it's a bad document!!!

[Jim Chad]

Austin, That surprises me. Would you expand on your one word answer?

[austin3515]

EVery document I've ever seen says "if the employer eleclts to test statutory exclusions separately, QNEC's can be allocated soley to the plan being tested" or somehting like that... Very standard...

[Jim Chad]

Austin Doesn't that make the answer to Lori's question "no"?

Or do I need another cup of coffee?

[austin3515]

What a dolt... I screwed up a one word answer... Funny, I read your original question to me and was quite surprised by YOUR question!

So I'll put you back up to your original lofty position on the respect scale...

FYI, I'm now about 1/3 of the way through my morning coffee, which probably is why the question was more clear when I read it this time!

[BG5150]

I'd like to add, though, that if you are doing refunds more than 1 yr after the plan year end, a QNEC (whether it is just a QNEC or a 1-to-1) is given as if the plan was not split into component parts. (EPCRS)

[Lori H]

The plan year just ended 12/31. The plan doc is a standardized Corbel which states "...the provisions of Section 401(k)(3)(F) may be used to exclude from consideration all NHCE's who have not satisfied the minimum age and service requirements of Section 410(a)(1)(A)". My thinking is that if the 2 excluded participants under the restructured eligibility requirements are not in the plan, then the QNEC is only necessary to bring the ADP/ACP up to the 2% spread without them. Pre restructuring NHCE ADP is 1.80%, after restructuring 2.40%. HCE ADP is 8.99%

[austin3515]

If its the GUST document, see 12.4(j) that you can apply the provisions of Section 12.4 (which is just the plain vanialla ADP language) AND 12.5 (which has adjustmetns to the ADP test, including QNECs) separately to each "plan" (i.e., the otherwise excludable plan and the statutory employee plan). So that is your basis in the document for providing QNECs to the statutory participants only (or non-excludables, whatever you want to call them).