HCEs want to give more!

[Logan401]

I have an unusual request from a client.

The client funded a New Comp. PS on Aug. 8th.

There are 2 groups: HCEs & NHCEs.

Two participants in the HCE group. The owner an the CEO making > 110k.

The owner asked me now if he can pull $12k from the 2 HCEs accounts & distribute that to the NHCEs.

They want to pull $6k from each of the 2 HCEs.

The problem is, they do not make the same pay, so pulling $6k each would make an uneven distribution from the group they are in.

Can we amend the HCE Group to make them each in their own group to make this happen?

I know you cannot amend after the 1st of the year, but not sure if you cannot if the $ is going to increase the NHCE group's benefit.

[ETA Consulting LLC]

You cannot change the conditions for receiving an allocation after those conditions have been met. Not sure how this fits into your fact pattern, but you can amend however you like provided you don't violate this rule. Also, if the plan is a Safe Harbor 401(k), you want to ensure the amendment wouldn't change the terms of the notice that was provided to employees at the beginning of the year.

Good Luck!

[Kevin C]

Is it a 401(k) Plan? If so, perhaps the employer could designate $12,000 less for group one for the PS contribution and allocate $12,000 as a QNEC for the NHCEs. Of course, that assumes the document does not require a test failure to make a QNEC. That doesn't get you exactly where they want, but it might be close enough.

[Tom Poje]

you indicated you have 2 groups.

1 group is HCEs, and I imagine the formula is comp to comp within the groups.

so if I give 1 HCE 7%, I'm pretty well stuck giving the other one 7%, so if they have different comps, I don't see how you could take away 6000 from each of them. they would end up with a different % of pay.

[david rigby]

Original post stated "...pull $12k from the 2 HCEs accounts..."

Of course, you cannot remove something from a participant's account, once properly allocated.

[Logan401]

you indicated you have 2 groups.

1 group is HCEs, and I imagine the formula is comp to comp within the groups.

so if I give 1 HCE 7%, I'm pretty well stuck giving the other one 7%, so if they have different comps, I don't see how you could take away 6000 from each of them. they would end up with a different % of pay.

Hi Tom, that was the answer I was looking for. Logic told me that you cannot do it.

Seeing they were HCEs, and they both expressed they did not care if it came out of their accounts evenly on a dollar basis, I had to ask!

Thank you