EBDI Posted February 16, 2016 Posted February 16, 2016 This plan is an age weighted, 3% non elective safe harbor, calendar year 401k plan. There are two HCE's. One HCE is younger than the 2 NHCE's. As a result the rate group test and the average benefits test fail for 2015. Is it possible to give the two NHCE's a higher contribution to get the general test to pass? The compliance software I use indicates it can't be done because they are not in a separate allocation group like a new comparability plan.
EBDI Posted February 16, 2016 Author Posted February 16, 2016 Can the 11g amendment be used to give a pro-rata contribution to the two NHCE's? I would like to avoid bringing into the plan any of the 3 employees who are not eligible due to the 1000 hour requirement. There are no terminated participants to bring into the plan.
Tom Poje Posted February 16, 2016 Posted February 16, 2016 probably could pass testing with component plans. pretend you have 2 'plans' not aggregated young HCE and one NHC on an allocation basis - the other 2 employees treated as includable and at 0. the other HCE with the nhce on an accrual basis and now the 2 ees from the allocation basis treated as 0. Lou S. 1
Mike Preston Posted February 16, 2016 Posted February 16, 2016 EBDI, yes, but Tom's suggestion is better. However, you state that the plan's allocation is "age weighted". If you are using that term correctly and the plan's formula satisfies the definition of "age weighted" in the regs, the plan will pass (and you don't even need to worry about gateway). What are you not telling us?
Lou S. Posted February 16, 2016 Posted February 16, 2016 EBDI, yes, but Tom's suggestion is better. However, you state that the plan's allocation is "age weighted". If you are using that term correctly and the plan's formula satisfies the definition of "age weighted" in the regs, the plan will pass (and you don't even need to worry about gateway). What are you not telling us? I think what is happening is participants get the greater of the age-weighted PS contrib (of which the first 3% is SH non-elective) or a 3% safe harbor non-elective contribution. Because the HCE is so young, probably a kid of the owner, they are getting the 3% SHNE which is yielding an EBAR greater than what he would get if their wasn't a 3% floor. But yes, Tom's suggestion is probably better than mine.
EBDI Posted February 16, 2016 Author Posted February 16, 2016 Mike, Lou is correct about the age weighted and 3% safe harbor floor. Tom, thanks for the suggestion. I will try that to see if it passes.
Mike Preston Posted February 16, 2016 Posted February 16, 2016 People who design their plans such that the HCE's receive the SH deserve their fate. Doghouse, Bill Presson, John Feldt ERPA CPC QPA and 1 other 4
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