11-g Amendment

[Dougsbpc]

Can a cross-tested profit sharing plan use accrued-to-date method based on average comp with a corrective amendment bringing in a NHCE who is not yet eligible?

Can't seem to find anything that prohibits this.

Thanks.

[Jim Chad]

FWIW I think it is OK.

[John Feldt ERPA CPC QPA]

If testing using the accrued-to-date method, average compensation must be used with a uniform averaging period for all participants (at least 3 years, or all years of employment for individuals with less than 3 years). Under accrued-to-date testing, the number of years to divide by are the number of years the employee benefited under the plan, so if they are being brought in under a -11(g) amendment, you'll just have one year for your denominator for that NHCE.

If the NHCE was hired in late 2011 with low 2011 wages compared to 2012, that makes a low average wage. Then, with the allocation for 2012 based on the higher 2012 wages, this produces a larger EBAR than you would get using the annual method with annual comp. I would not suggest designing a plan on this, but only look for it when your other normal testing avenues fail.