New Comparibility Plan and QNECs

[Richard Anderson]

A new comp plan has the following classes:

Class A - Owners

Class B - Non-owner division X employees

Class C - Non-owner division Y employees

Class D - Non-owner division Z employees

If the plan fails the ADP/ACP and the employer wants to contribute QNEC to correct, can the document be worded to allow different QNEC contributions to different classes.

Example:

Class B - 2% QNEC

Class C - 1% QNEC

Class D - 0% QNEC

If this is OK, would the document (volume submitter) wording be something like this: The Employer Qualified Non-Elective Contribution used to satisfy the Actual Deferral Percentage tests will be separately determined for each of the classifications of Participants.

[Erik Read]

I think you're on the right track. However - I'm not sure I like the verbiage you've choosen to use in the document. I'd stick to the addage that the formula has to be definetly determinable. ie - the QNEC will be allocated first to ..... in an amount not to exceed or at least _%, then to..... in an amount not to exceed or at least _%, thirdly to ...... In my opinion that may be more acceptable to the IRS then, "to be determined".

Again - just my opinion.