Cross Tested Final Short Plan Year

[PFranckowiak]

Assumption:  All participants except HCE's terminated employment 2/28/17.    (Company Bought out - new company took employees and business, but not plan or corporation)

Existing Corp will continue until 12/31 as owner finalizes everything.

Owner wants to make PS contribution for the year.

Owner already put in $24,000 deferral - So cannot terminate plan as of 2/28 due to 415 limits.

Assuming the NHCE's compensation is $110,000 for 2 month year they worked.  5% (SH and GW) is $5,500

Owner anticipates Compensation to be around $50,000 for him.

If we continue the plan until 9/30.

415 Limit would be 54,000 x 9/12=$40,500

HCE max  ER contribution would be $40,500-$18,000 =$22,500

Maximum Contribution limit = .25 * (110,000 +50000) = $40,000

$5,500 +$22,500 =$28,000.

If we can pass Average Benefits Test - is there anything else I am missing?

I want to try to terminate the plan before 12/31 so that participants can get paid out before year end.

[Lou S.]

Just thinking outside the box why can they make a 5% of pay contribution now for all the eligible employees, pay them out at 100% vested as terminated employees then terminate the plan at year end and give the owner whatever cross tested contribution passed testing. Assuming the document allows.

[Mike Preston]

If you read between the lines, the OP implies that the terminated participants are precluded from being paid out in the absence of the plan being terminated.  I agree that a simple change to the document and an SMM would allow them to be paid out.  Then if the 5% supported the HCE's 45% of pay employer contribution ($22,500/$50,000) it all works out swimmingly.