QNEC & QMAC

[austin3515]

Someone can get a 5% QNEC plus a 5% QMAC w/o violating the targeting rules, right?

[austin3515]

SCratch that, got a better question. Small plan wiht just one NHCE deferring. The way I see it, I can essentially do a bottom up QMAC for this one employee until testing is passed. Since she is the only employee, her match rate is the representative match rate, and thereefore the test on targeted matching contributions would be passed by default.

Seems like a glitch in the rule for small plans, but I think it works. Anyone?

[Tom Poje]

I guess I'm not sure why it seems like a 'glitch'. if all you have is 1 NHCE, whether under old rules or new rules you had either 2 choices: refund to the HCEs or kick up the NHCE until you pass.

[austin3515]

One NHCE deferring. 4 NHCE's total.

Does that change things?

[Tom Poje]

ah, forgive the ignorance of your humble servant.

then I believe your representative group consists of 50% of all 'eligible' NHCEs (those who could defer, not those who defer.)

50% * 4 = 2

since the lowest rate of any 2 NHCEs is 0% you are traveling up the great waterway without an instrument to propel yourself

[austin3515]

ah, forgive the ignorance of your humble servant.

then I believe your representative group consists of 50% of all 'eligible' NHCEs (those who could defer, not those who defer.)

50% * 4 = 2

since the lowest rate of any 2 NHCEs is 0% you are traveling up the great waterway without an instrument to propel yourself

I actually just found an Example in the EOB that was spot on. The following is taken from the EOB:

Example, only 1 NHC is actually deferring. Suppose in the original example that A is the only employee defers for the Plan Year. Under these facts, the entire mmatch allocate to A, regardless of the rate could be included because the representative matching rate is boaded on on the eligible NHC's who make elective deferrals and A is the only one who does.

So now I'm pretty well convinced that this will work... (but please do let me know if you agree!!).

[Tom Poje]

with QMAC I would agree, but you got me twiddled in circles because your original questioned mention QNECs and I thought that was what you were referring to - as I am much too lazy to re-read your changes.

for match you have to have the provision you only count bodies who defer- otherwise any match could conceivable fail the representative rate