Mid-Yr Entrant, zero "elig" compensation

[cheersmate]

Plan excludes pre-participation compensation, comp is paid (as opposed to accrued)

Plan is Top Heavy

Contributions testing on cross tested basis w imputed disparity

Elig 12 mos/1000 hrs (no min age), dual entry dates (1/1 and 7/1)

 

Employee DOH 3/2016, works 1000+hrs in initial 12 mos of svc projected Entry Date 7/2017 HOWEVER Terminates 6/15/2017, therefore never enters the plan

 

Same employee is Rehired 12/20/2017, 1st paycheck following rehire is 1/12/2018

 

According to the Plan, this employee enters the Plan as of Rehire Date 12/20/2017.

2017 Total Comp is $7,000 (paid Jan 1 - 6/15/2017)

2017 Elig Comp is $0 (but for THM, which is full year)

 

PS is determined on $0 elig comp, GW is determined on $0 (Question ... is GW satisfied because 5% GW * $0 = $0?). TH is determined on $7,000 -- $210 THMin

Question How is her EBAR calculated? Is her EBAR based on $210 contrib (due to THMin) and $7000 comp, even though her otherwise eligible pay is $0?

 

Thank you

[Kevin C]

We had the same situation a couple of years ago.  We ended up excluding the person with zero entry date compensation from the (a)(4) testing.  Another option might be to test using full year compensation.  That thread is here:

 

[cheersmate]

Hello Kevin -

I have not read through the link you provided yet, but in excluding the person from the a4 testing you mean it was as if they weren't eligible at all, not that you counted them as a zero EBAR, correct?  Also, even though you did that, you still provide the 3% THMin correct?

Thank you so much!

[cheersmate]

20 minutes ago, Kevin C said:

We had the same situation a couple of years ago.  We ended excluding the person with zero entry date compensation from the (a)(4) testing.  Another option might be to test using full year compensation.  That thread is here:

 

So I have read the thread and all is eerily similar...

If I exclude this participant in a4 testing, the ABT is low 60%... If I include this participant using her full year comp, ABT improves and if back into "eligible comp" such that the GW and THM are same amount, the plan almost passes ABT providing only the GW min to NHCEs.  So including in some fashion helps. So would it be reasonable, like you did, to simply exclude her from a4 altogether as if ineligible (albeit provide the THMin...)?

[Kevin C]

Yes, I mean not counted at all in the (a)(4) test, but she received the TH minimum based on her full year comp.  After going around in circles, that seemed the most reasonable option to us. 

[cheersmate]

Got it, Kevin C and thank you!