Non Elective SH 401k with New Comp Base allocation

[dmb]

Eligibility for 401k salary deferrals and the 3% SH allocation is no service required. There is a one year service requirement for the new comparability allocation on top of the 3% SH. Forgetting about statutory elig requirements for now:

Can the participants receiving the 3% SH allocation but not the base be consiered in rate group testing and if so must they then satisfy the gateway requirement which is 4.49% or might they be exempt from gateway since they're not eligible for the new comparability base allocation?

Thanks.

[ETA Consulting LLC]

Eligibility for 401k salary deferrals and the 3% SH allocation is no service required. There is a one year service requirement for the new comparability allocation on top of the 3% SH. Forgetting about statutory elig requirements for now:

Can the participants receiving the 3% SH allocation but not the base be consiered in rate group testing and if so must they then satisfy the gateway requirement which is 4.49% or might they be exempt from gateway since they're not eligible for the new comparability base allocation?

Thanks.

Yes. Some prototypes contain that option to select a "gateway" class to be used exclusively for purposes of getting each person who would've otherwise not satisfied the gateway up to that amount. Your document may already have that provision. The question, then, becomes whether that provision brings in only those who failed the accrual requirements or does it actually incorporate those who failed to meet age and service for that particular contribution.

If not, then would it be reasonable to define your classes as employees who are 21 & 1 before each class currently in the plan (e.g. 21 & 1 who are HCE; 21 & 1 who are NHCE, Early Entrant HCE, Early Entrant NHCE) and change the age and service requirements to immediate.

I appreciate the complexity of your question.

Good Luck!

[AndyH]

I don't see this as a complicated question.

Yes.

If not utilizing the otherwise excludable rule, which was the premise to the question, a nonelective employer contribution, whether it be SHNEC or not, must be included in testing and gives rise to a gateway requirement.

[ETA Consulting LLC]

If not utilizing the otherwise excludable rule, which was the premise to the question, a nonelective employer contribution, whether it be SHNEC or not, must be included in testing and gives rise to a gateway requirement.

His question was how you could provide the additional contribution in order to meet the gateway (when the HCE receives above 9%) when those early entrant fail to meet the age and service requirements for that contribution.

[AndyH]

Maybe we read it differently. I'll parse the question:

Q1: Can the participants receiving the 3% SH allocation but not the base be consiered in rate group testing

A1: Yes, they must be considered.

Q2: if so must they then satisfy the gateway requirement which is 4.49% or might they be exempt from gateway since they're not eligible for the new comparability base allocation?

A2: Yes, they must satisfy the gateway.

How to accomplish this is another question which has not yet been asked.

[BG5150]

The Gateway is not a profit sharing contribution. It is an Employer contribution. So, if you get ANY Employer contribution (Safe Harbor or PS), you must get at least the gateway if the plan is to be cross-tested.

[John Feldt ERPA CPC QPA]

So, if you get ANY Employer contribution (Safe Harbor or PS), you must get at least the gateway if the plan is to be cross-tested.

Unless you are in the OEE group. Those in the Otherwise Excludable Employee group are not required to get the gateway unless the benefits in the OEE group also need to be cross-tested (which is highly unlikely). Think of it as a separate plan.

[dmb]

Thanks for all the responses. AndyH nailed it, that's what i was looking for. Thanks again.

[BG5150]

So, if you get ANY Employer contribution (Safe Harbor or PS), you must get at least the gateway if the plan is to be cross-tested.

Unless you are in the OEE group. Those in the Otherwise Excludable Employee group are not required to get the gateway unless the benefits in the OEE group also need to be cross-tested (which is highly unlikely). Think of it as a separate plan.

I replied in the spirit of

Forgetting about statutory elig requirements for now:

[John Feldt ERPA CPC QPA]

Yeah, right after I posted I reread and figured that's probably the case - sorry 'bout that!

[ETA Consulting LLC]

AndyH nailed it, that's what i was looking for. Thanks again.

My bad :angry: