Cross Tested plan with QNEC's

[Mr Bagwell]

9/30 PYE

3% ER Safe Harbor

Cross Tested with two groups

There were two employees (NHCE) that received QNEC contributions due to a missed deferral opportunity.

Where do these QNEC contributions come into play when calculating the cross tested profit sharing allocation?

How does relius handle the QNEC contributions when calculating the cross tested profit sharing allocation?

What should I be looking/checking to make sure the calculation is being done correctly?

[BG5150]

If you need to take them out (I am not saying they have to, only IF), you can use the "Additional Test Amounts" under "Compliance" in Census. Use negatives. They will pull out of your testing.

[Tom Poje]

a plan has to pass nondiscrim testing both with and without the QNEC (1.401(k)-2(a)(6)

and so, while testing the plan without the QNEC (if cross testing) you have to satisfy the gateway without the QNEC. you cannot say "Fred received a 5% QNEC enough to satisfy the gateway. I now perform my tests with and without the QNEC"

[Mr Bagwell]

Thanks

[Mike Preston]

Nobody has said so explicitly, so allow me: QNEC's attributable to missed deferrals are excluded from a4 testing. If they are excluded from a4 testing then the comment about passing testing both before and after is irrelevant.

[Tom Poje]

would agree if QNECs were for missed deferrals. I did not read the original question that way

[Mr Bagwell]

They were missed deferrals. I will exclude from a4 testing.

Thanks!

[Below Ground]

Do these exclusions apply to the 3% Nonelective for a 401(k) Safe Harbor Plan?

[John Feldt ERPA CPC QPA]

No, the 3% safe harbor nonelective is not treated like a QNEC when it comes to satisfying 401a4, thus, the 3% safe harbor can be counted toward satisfying all or a portion of the gateway.

If you impute disparity, however, you cannot impute with any of the 3% safe harbor (so it that sense it does get treated like a QNEC).

[austin3515]

Mike Preston, I believe you 100%! For my own edification can you point me to the site in the new ECPRS?

[Mike Preston]

Cite? EPCRS? Just got back from vacay so it may take me a while to find a cite, especially in light of comments that the government speakers made at ASPPA Annual which essentially said: an EPCRS QNEC is treated as a regular QNEC for all purposes. If so, then they are excluded from testing because of the rule that a4 testing must pass before and after. So the cite won't be in EPCRS it will be in a4.

[austin3515]

Well I guess the question becomes very important if the QNEC would trigger a gateway minimum. If testing must be passed with and without, then a GWM would be required. If not taken into account at all then no GWM.

No big deal on the cite, I was just curious to see it.