Prior year testing and QNEC

[rcline46]

Plan is using prior year testing and the client does not like the limit on the HCEs. Unfortunately the current year results are worse. So, they have decided to do a QNEC so they HCEs can defer more.

The client understands the QNEC must be deposited before 12/31/2010. So far so good. It appears the QNEC must be based on the compensations for the NCEs for last year (2009). The document allows me to limit the QNEC to those employed at end of year 2009. THis means that we can compute the QNEC based on the anticipated deferrals for THIS year for the HCEs such that the test will be passed.

Did I miss anything?

[austin3515]

The 415 limit comes to mind, but otherwise no. With respect to the 415 limit, as long as everyone getting the QNEC has enough 2010 compensation you should be OK (of course, they were all still active, so probably they do).

[BG5150]

Did I miss anything?

Start talking to the client about Safe Harbor for next year.

[rcline46]

The client has been resistent to SH in the past, but now that the HCEs want to contribute the maximum they are willing to listen, finally. Also because they want the max, will likely approve going to current year testing this year.

Thank you all.

[MWeddell]

Follow whatever method is specified in the plan document for allocating QNECs.