Can QNEC to cure ACP failure be funded from Forf account?

[Guest Spock]

Folks, I'm on the Corporate side of the aidle now - been out of consulting for awhile. We have a new match in our plan and we use prior year testing. Last year's NHCE ACP was 0.42% from after-tax contributions and one member of the controlled group that had a match, but I'm expecting the introduction of the match (50% up to 6%) to the larger population to significantly increase the NHCE ACP. Since we use the prior year method, I expect HCE's will be signficantly limited from an ACP perspective. I think we can shift a full percentage point from the ADP test, but if that is not enough and we want to use a bottom-up QNEC to pass the test, can we use the forfeiture account to fund the QNEC? Is it permissable to use a combination of methods to pass ACP, i.e. shifting AND QNEC.

Are there any testing gurus that can offer advice?

LL&P

Spock

[MWeddell]

Yes, you can use a combination of shifting and QNECs.

No, QNECs cannot be funded from the forfeiture account. QNECs by definition have to be fully vested at the time they are contributed to the plan and the money in the forfeiture account obviously was nonvested dollars when first contributed.

You are going to run into a timing problem making QNECs now when you are using the prior year method for determining NHCEs' ADP and ACP. It's too late.

You should know that there are restrictions put in place a decade ago on the bottom-up QNEC method.

Whew! Did I answer all of the questions you had?

[Guest Spock]

Yes, thanks. I understand there is a max limit of 5% on the QNEC. I never liked that "100% vested when contriubted" language. Would be more appopriate to say "100% vested when allocated".

I agree with you about the timing issue on the QNEC when using the prior year method.

LL&P.

S

[Tom Poje]

on page 16 of this pdf file (page 14 of the document) describing what is suppose to be in the document, it says

forfeitures can not be used as QNECs...

but then maybe Vulcans have another way of reading or interpreting that.!

coda_lrm1011.pdf

[BG5150]

If you are worried about '14, switch to current year testing.

And you CAN do a QNEC for a prior year test, but you have to wait until 12 months after the PYE to do so, (I'm not sure if bottom-up is allowed in that case, though. Take a look at EPCRS)

[Guest Spock]

Thanks to all. The .pdf was spot on. Whatever we read, we prefer to read it logically, but logic is sometimes absent in the world of non-discrim testing.

May your journies be free of incident, LL&P.

S