Gateway With dual Eligibility

[Nate X]

A participant enters the dual eligibility for profit sharing mid-year. The participant was eligible for 401(k) and SHNE for the entire plan year. The document is written so that the participant is eligible for a profit sharing contribution based on his compensation from the dual entry date to the end of the plan year. The participants full year comp is $30K and his eligible comp based on the dual entry date is $5k. Which compensation does the gateway min need to be based on?

Thanks!

[J Simmons]

Awaiting Tom Poje's correction...I would think on the $5k. The fact he's entitled to a SHNE means he has to get a gateway for the year, but that the SHNE is for the whole year ought not drive to the conclusion the compensation on which the gateway must be based has to be the entire year.

[Kevin C]

The 1/3 of the highest HCE rate part uses plan compensation which can be entry date compensation. The 5% of compensation part uses 415©(3) compensation, which is full year.

[Nate X]

Actually the 5% of compensation part can be based on the 415 compensation for the part of the year that the participant was eligible. This was in the final regs related to the gateway requirement.

If any one else has a different opinion than J, please let me know.

Thanks!

[Kevin C]

You're right. It would help if I read the whole sentence.

(vi) Minimum allocation gateway

(A) General rule. --A plan satisfies the minimum allocation gateway of this paragraph (b)(1)(vi) if each NHCE has an allocation rate that is at least one third of the allocation rate of the HCE with the highest allocation rate.

(B) Deemed satisfaction. --A plan is deemed to satisfy the minimum allocation gateway of this paragraph (b)(1)(vi) if each NHCE receives an allocation of at least 5% of the NHCE's compensation within the meaning of section 415©(3), measured over a period of time permitted under the definition of plan year compensation.

[Mike Preston]

I think full year. Sorry.

[J Simmons]

I think full year. Sorry.

Hi, Mike,

Is your logic for such that the mid-year entrant was required to receive the SHNE for the first 6 months as well as the last 6 months of the plan year, and therefore the rule that requires an employee receiving any SHNE for the year triggers the gateway be provided the employee for that year also ought to require the gateway on compensation for all parts of the year as to which the SHNE applies?

[K2retire]

I agree with Mike for the reasons suggested by John.

[Mike Preston]

Actually, a little less restricted than that. Merely a simple rule that eligibility is by plan, not by source and this person was eligible for the plan as of the first day of the year and received a $1 of employer money somewhere along the way, triggering the gateway.