Accruals and Testing

[retbenser]

Given: Combined DB/DC plan

DB and DC service Eligibility = 1,000 hours

Condition for DC allocation = 1,000 hours

DC is a 3% Safe Harbor 401(k) Profit Sharing Plan

Participant has 1,500 hours in 2011 and 800 hours in 2012

Since participant satisfies 1,000 hours in 2011, he must get 3% safe harbor in 2012 even with less than 1,000 hours.

Question: In 2012, should participant also receive the excess DC allocation to satisfy the gateway/401(a)(4) requirement even with less than 1,000 hours?

Thanks.

[ETA Consulting LLC]

You would hope that the document is written to allow it; otherwise you missed the boat for the year. This is one of the considerations when drafting a document; not to preclude someone who receives an allocation from meeting the gateway.

Good Luck!

[retbenser]

You would hope that the document is written to allow it; otherwise you missed the boat for the year. This is one of the considerations when drafting a document; not to preclude someone who receives an allocation from meeting the gateway.

Good Luck!

I use the ASC document and I am no sure how to handle it.

Fail Safe provision? 11(g) amendment?

Remove the 1,000 hrs allocation requirement?

Any suggestion is appreciated. Thanks.

[Belgarath]

I don't know ASC documents, but are you sure it doesn't have language to take care of this? I think a lot of pre-EGTRRA restatement documents lacked the special language, but it seems like generally EGTRRA restated documents have appropriate language to provide gateway even if normal allocation conditions would preclude it.

[retbenser]

I don't know ASC documents, but are you sure it doesn't have language to take care of this? I think a lot of pre-EGTRRA restatement documents lacked the special language, but it seems like generally EGTRRA restated documents have appropriate language to provide gateway even if normal allocation conditions would preclude it.

Oh okay -- I see it. Thanks.

[John Feldt ERPA CPC QPA]

I doubt the IRS would approve a basic document to have language in it that allows an allocation condition to the gateway. I seriously doubt ASC would write it that way too.

That does not mean you can allocate any extra PS above the gateway however, because that would be a profit sharing allocation, which you stated has a 1000 hour requirement. Put each person in their own class and remove the allocation conditions. When each person is in their own class, you could still choose to not allocate PS to those with under 1000 hours and/or are employed on the last day as long as all the nondiscrimination tests and coverage is met.

[BG5150]

^ you lose the ABT for coverage in that case, tho'. So don't give too many zeroes. Though with a SH plan, that point may be moot.