11g Amendment to Correct Coverage Failure

[Laura Harrington]

Controlled group has separate 401k plans for the two related entities. One plan has safe harbor match, the other plan has no employer contributions. Because of this I do not have the option of aggregating for coverage.

The non-safe harbor plan has no HCEs, so coverage is automatically passed.

The ratio percentage test for the safe harbor plan is failing, so the average benefit test was completed. The nondiscriminatory classification test passes, however, the average benefit percentage test does not.

The plan document allows for discretionary QNECs to be given to only the NHCEs employed on the last day of the plan year. However, most of the NHCEs terminated in 2008.

Under Treas. Reg. 1.401(a)(4)-11(g) can the plan adopt a retroactive amendment to remove the last day requirement so that more of the NHCEs are eligible for the QNEC? This would reduce the total dollar amount of the QNEC because the youngest NHCEs are the terminated ones and we are using accrual rates for the average benefit percentage test.

[Mike Preston]

Yes.