TH contributions in a SH match plan

[Bird]

This is something that came up in the proposal process and probably would never be designed this way, but it's become a curiosity. Let's say you have a SH match plan, and HCEs are excluded from the SHM. But the plan is TH, and Keys (small company so Keys and HCEs are the same) are not excluded from TH. Every NHCE contributes and gets the max SH match. Keys are getting TH (at least in the proposal system) so it winds up that HCEs are getting 3% nonelective and NHCEs get nothing, but the system is showing keys getting 0% nonelective for testing purposes (I guess because it isn't specifically elected as a PS contribution) so it is passing nondiscrimination testing.

My take on this is that SH match is deemed to satisfy TH, so the keys should not get a TH contribution. That is, I don't think it is an optional position to say that SH match is deemed to satisfy TH; it does, period.

That puts the kibosh on the whole thing, but I still think the TH contributions, if made, should be tested for nondiscrimination (and would fail). Any disagreement on that?

[Bri]

I agree, sounds only like persnickety software rather than a plan design issue.  Any leeway on just giving the Keys the match and calling it a day?

[Lou S.]

I'm a bit confused. SH Match plan is deemed not TH if SH Match is only contrib.

If plan is TH and makes additional contrib then it does need to satisfy TH. If you are only making TH than I think that does pass but if you are making more you will need to pass testing somehow and can't exclude the TH in your calculations.

[Mr Bagwell]

"Any disagreement on that?"  No.  I agree with your assessment.  

I do have a question...  why was there a necessity to give the HCEs (which were also the KEYs) a TH?  Just a confusion as to the TH rules?

[RatherBeGolfing]

It sounds like the software is not picking up that this is SH only and deemed to pass TH.  In some systems, you have to indicate it is deemed to pass TH to prevent it from going into the THM calc.

[Bird]

Thanks all. This is something that would never come up in actual practice but arises when someone thinks that buying software is a replacement for knowledge. And the proposal software isn't doing the same testing as the compliance software so it's all a bit wacky.

[austin3515]

I know in Relius there is a checkbox to exclude top-heavy minimums from testing (or maybe treat THM only as not-benefitting maybe?).  I use relius ASP so it takes me 45 minutes to login, otherwise I would tell you exactly what it says, LOL,

[austin3515]

I personally don't understand why you would ever not exclude keys from TH Minimum.  The match is discretionary (at least in our Relius Corbel doc) so they just have to contribute 3% to get a 3% match.  So I don't see what is gained.

[austin3515]

Here is the screenshot in Relius: