DB Plan covering HCE's only - 110% test

[Jakyasar]

Hi

This is first for me and want to check if test is needed.

DB plan covering 1 owner HCE and one non-owner HCE.

2021 AFTAP is certified at 165% so no issues there.

The non-owner HCE is terminated a  month ago  and accrued a benefit for 2021.

Do I need to check for 110% liability test? I do not think so?

If yes, I will add FT to TNC and possibly use 430 rates. Is it ok to use ARPA-21 rates to test, if necessary? Owner is ok with whatever rate that would allow the non-owner HCE to be paid out.

Thanks

[Calavera]

1. Yes you need to do 110% test
2. You test it on a post-distribution basis as remaining asset over the estimated liability for the remaining owner HCE
3. As long as you apply consistent method, I believe it is ok to use ARPA-21 rates as long as you are planning to use ARPA rates for your 2021 valuation.

[Jakyasar]

Surprising to use for a plan covering HCEs only.

 I agree with the other 2 points.

[Mike Preston]

7 minutes ago, Jakyasar said:

Surprising to use for a plan covering HCEs only.

 I agree with the other 2 points.

Have you checked the basic plan document? I've been told that there is at least one out there that has approved a provision which invalidates the 110% test with respect to a plan that has since inception covered nothing but hces.

[Jakyasar]

Very interesting but mine does not have that provision, I will ask the vendor anyway.

Even if it did, I am not sure if it would work in my case.

The employees entered the plan as an non-HCE and then became but lookback year method although no other entered the plan ever.

So, by definition of any HCE, if a husband and wife plan, if one terminates and wants a payout, I still have to perform 110% test? Wow

[Mike Preston]

2 hours ago, Jakyasar said:

Very interesting but mine does not have that provision, I will ask the vendor anyway.

Even if it did, I am not sure if it would work in my case.

The employees entered the plan as an non-HCE and then became but lookback year method although no other entered the plan ever.

So, by definition of any HCE, if a husband and wife plan, if one terminates and wants a payout, I still have to perform 110% test? Wow

I'm sure that makes sense to you.

[Jakyasar]

None whatsoever

[CuseFan]

You and I are partners and trustees of the plan - I terminate and initiate a distribution of my total benefit and leave you with less than your total benefit, are you happy? Is that fair? Even owners and HCEs are entitled to and afforded some protections by these rules.

[Jakyasar]

Depends on how you test  it for 110%. Apart from partnership, my comment was for a husband and wife plan.

[Bri]

I had an actuary mention to me that her firm's Datair document has the provision that the 110% rule won't apply if the plan has only ever covered HCEs.

[Jakyasar]

Mine does not, I checked and also confirmed with the provider.

I did some additional reading and there is a great paragraph in EOB. I am not sure if I am allowed to post it here. Moderator???

The HCE passed the test anyway so all good here but this was a good discussion and thank you all for your time and input.