Gateway Question

[stbennet]

Cross tested PS/CB plans. CB plan is one year/dual entry with 1000 hour requirement for allocation, PS plan has no entry requirements and only a last day requirement for contribution. There are several HCEs (all but "Main Guy" excluded in the CB) and a bunch of employees, but the only PS groups are "Main Guy" and "Everybody Else."

Client wants to minimize the PS contribution for "Everybody Else."

Using otherwise excludable testing, If "main guy" is maxed out and those people benefiting in the CB plan get "bumped up" to the gateway the plan doesn't pass 401(a)(4) testing.

Are there are other options besides?

1) Reduce "Main Guy" in the PS so gateway is enough to pass 401(a)(4)

2) Give "Everybody Else" including all those HCEs the same amount above the gateway to pass 401(a)(4) (nearly doubles the cost of "Everybody Else" as opposed to gateway for non-OEE alone.)

[AndyH]

This sounds like a real bad design, IMHO.

Is this question after year end, or a planning question? Do you have time to amend the ps allocation groups? You should have non-"Main Guy" HCEs in their own category, IMO.

You should get rid of the last day provision go-forward.

Is the arrangement top heavy? What do the plans say about who gets top heavy, and in which plan?

Short answer: You may be able to force a 5% top heavy contribution in the ps plan for non-keys depending on what the plan says, possibly with less to Keys. Alternatively, maybe you have gateway language that could boost up only NHCEs. Another is you do the allocations, the test fails, and you do an 11-(g) corrective amendment selectively. I would not do this last approach lightly, but it might work as a temporary fix. A permanent fix is redesign of the ps plan at least.

I'd need to see the details and the document provisions to get more specific.

[SoCalActuary]

I doubt that you are using the best testing techniques.

If you can get the gateway to pass, applying the PS contribution to all others, that is the first step.

But for the 401(a)(4) rate groups, you can test the other HCE's with a portion of the NHCEs on a contribution basis.

Study the rules for component plan testing.