QNEC to pass 410b

[Guest mdelin]

hello,

I am bringing in two excluded employees in order to pass 410b. They get QNEC equal to avg deferral rate of NHCEs in the plan and then SH match on such amount. I know that I can apply the QNEC to my TH minimum but can I also use it towards my minimum Gateway?

Thanks,

[Tom Poje]

I'd hold the answer is somewhat unclear in this scenario.

The regs are clear if the QNEC is used to pass the ADP or ACP test then you have to run 2 nondiscrim tests - one with and one without the QNEC. 1.401(k)-2(a)(6)(ii). obviously if you run the test without the QNEC, then the QNEC can't be used for the gateway (but then, unless the person received an additional nonelective, he wouldn't need the gateway)

but what happens when the QNEC isn't used to satisfy the ADP test?

in this particular case, you indicated a Safe harbor match is provided, and so I would say that the QNEC is indeed used to satisfy the ADP requirements and thus you need to run 2 nondisctim tests - one with and one without the QNEC.

but that is my best guestimate.