Regs For Gateway Allocation

[mming]

Looking through 1.401(a)(4)-8(b)(1) I found the method for calculating the gateway amount, but I could not locate any passage that describes the requirement for the gateway to be given to every NHCE who is being allocated any employer contribution, even if they wouldn't normally be eligible for a profit sharing allocation due to a 1,000 hour requirement (e.g., when participants must be given a minimum top heavy allocation). Does anyone know where in the regs this can be found?

[Tom Poje]

you can keep looking, but you won't find it because it is not in there (at least not 'word - for - word')

you are very observant!

Here is what happens: (or at least happened in this case)

the govt releases proposed regs and asks for comments

after considering the comments, the final regs are released. sometimes they get changed, or the govt simply comments on them.

In this case, the comments are in the preamble to the final regs.

reminder, you have a 'plan' which can consist of 401k, 401m and 401a4

and then you have a 'plan' which can be very specific, in this case, benefitting under the 'plan' meaning just the 401a4 plan.

but anyway, see page 7 of the pdf file. dang, will you look at that, someone even went and highlighted part of this file.

nondiscrim regs.pdf

[Belgarath]

I've wondered about the following passage in the preamble, but never bothered to really look at it seriously. Do you mess with this, or find much in the way of practical application?

Similarly,

pursuant to §1.410(b)–6(b)(3), if a plan

benefits employees who have not met the

minimum age and service requirements of

section 410(a)(1), the plan may be treated

as two separate plans, one for those otherwise

excludable employees and one for

the other employees benefitting under the

plan. Thus, if the plan is treated as two

separate plans in this manner, cross-testing

the portion of the plan benefitting the

nonexcludable employees will not result

in minimum required allocations under

the gateway for the employees who have

not met the section 410(a)(1) minimum

age and service requirements.

[Tom Poje]

well, rarely is there an HCE in the otherwise excludable group, so rarely does that group need testing, hence no gateway.

On the other hand, generally the youngest people are in that group, so to help testing, the idea of splitting the groups is tossed out the window.

[John Feldt ERPA CPC QPA]

We have seen the OEE rule applied only a few times to avoid the gateway for that group, and it only worked when the over 21/1 group had enough younger folks to pass testing without those under 21/1. Sometimes the cost difference drives the decision: add more people from under 21/1 to pass, or just increase the PS allocation to those over 21/1. What's the net difference?