Rate Group Membership Determination snapshot

[Guest ridgecourt2002]

I know for HCE and Key we look at any day of the year.

But for rate group membership determination, I have been told by an actuary that you look at the 1st day of the plan year.

Example: if a rate group consists of owners, then members of that group would consist of owners on the first day of the plan year, and not include participants who become owners during the year.

And vice versa, if someone is an owner (on the 1st day of the plan year), but sells ownership during the year, he is still in the owner group because he was an owner as of the 1st day of the plan year.

Is this correct?

[Blinky the 3-eyed Fish]

This is entirely a plan document issue. So what does the document say? If it doesn't say, well then that is a poorly drafted document and it leaves room for how it should be interpreted.

[jpod]

I agree with Blinky. You need to scrutinize all pertinent provisions of the plan to find the best interpretation. If the plan simply says, for example, all "owners," and there is no definition of "owner" that is date-specific, and there is nothing else helpful in the plan document, it seems to me that the only reasonable interpretation is a participant is an "owner" if he is an owner at any point in time during the plan year. Stated differently, what would be the reasonable basis for concluding that it means someone who was an owner at any particular date, or someone who was an owner for the entire plan year?

[12AX7]

With the exceptions of Partners, this is a good argument for having each participant in their own allocation group. This may not solve your current issue, but we've found this helpful because the documents we use leave room for interpretation as well.

[Earl]

My document says (basically) you can pro-rate rates of each group based on months or days or there is a place to make an election to say one group or another for the full year.