Compensation for average benefits percentage test

[Belgarath]

I've managed to confuse myself here on something I shouldn't be confused about.

Say you have a 401(k), immediate entry for deferrals, and semi-annual entry for PS contributions - new comp with everyone in their own group. Plan excludes compensation prior to the time you become a participant in the particular component of the plan.

So, when you are doing your average benefits percentage test, and you are calculating the benefit percentages, do you calculate using compensation only from July 1 if that is when the participant entered the plan for contributions other than deferrals? Clearly you can do this purely for Gateway, but I'm getting confused about the rest. And even though deferrals are added back in, for this purpose, seems you would not add back in deferrals prior to July 1?

This will probably all be clear tomorrow morning after I've had a chance to step back for a bit...

[Belgarath]

It seems like under 1.410(b)-5(iii), you are allowed to use any of the alternative methods under 1.401(a)(4)-12. And under 1.401(a)(4)-12, definition of Plan Year compensation, (4), it appears that you can use the period during which the employee is a participant in the plan - "plan" for this purpose being the Profit Sharing portion of the plan.

Given that, it would also seem reasonable to only consider deferrals from date of participation in the profit sharing portion.

Does this make any sense at all?

[Tom Poje]

I guess you are not testing otherwise excludables separately, which of course would make life easier because then I think the question would go away. (assuming no HCEs in that group)

I would lean toward the following approach.

The 'plan' actually consists of 3 'plans'

for the 401k plan I would use total comp (comp from DOP in the 401k portion of the plan)

401m - your question implies there is none.

nonelective - use comp from date of participation.

[chc93]

I agree. But for the ABPT, I thought there was only one ABPT. And the ABPT has to be run using the earliest eligibility. So immediate eligibility, in this case. Then use all salary deferrals, match, employer contributions, and compensation from the earliest eligibility date (immediate, in this case).