Tom Posted Tuesday at 09:23 PM Share Posted Tuesday at 09:23 PM This will be a very easy question for this group. Dentist along with 2 eligible employees will receive 3% non-elective safe harbor for 2024. Dentist will also fund 10% PS. One employee terminated in 2024 with <501 hours. Coverage test rules seem to say if term <501 hours they are excluded from the coverage testing. Ok, but I'd bet our admin soft ware will say discrim testing fails since Dentist and 1 employee are getting 13% total and terminated employee with <501 hours is only getting 3%. I'm just doing a fast calculation to advise the client. I'm thinking this would fail 401(a)(4) perhaps? BTW the PS is provided on allocation basis not accrual cross-tested basis so no gateway minimum. Thank you, Tom Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted Wednesday at 01:02 PM Share Posted Wednesday at 01:02 PM If they received the 3% safe harbor, they are benefiting and thus not excluded from coverage testing and not excluded from nondiscrimination testing. To be ignored from the test, they have to meet all of these: 1) did not benefit, 2) did not work 500 hours, 3) terminated employment, and 4) the only reason they did not benefit was due to the failure to meet a condition, such as a last day or an hours requirement to get an allocation. If the terminee only gets the safe harbor, then you have only 1 of 2 NHCEs at the HCE rate group. You’ll need to run the average benefits test to answer your question. You can run that test either on a benefits-tested basis or on an allocations-tested basis. Gateway is not triggered by the average benefits test. Tell the system to not cross-test and that should turn off the minimum gateway. Link to comment Share on other sites More sharing options...
Tom Posted Wednesday at 08:16 PM Author Share Posted Wednesday at 08:16 PM Perfect - that confirms what I was expecting. Thank you Link to comment Share on other sites More sharing options...
Connor Posted Wednesday at 10:15 PM Share Posted Wednesday at 10:15 PM It has been a while since I last had to do testing, so please bear with me. I recall that any NHCE who benefits (even if just getting a 3% SHNEC) is entitled to a gateway contribution - in this case, a total of 4.33%, i.e., 1/3 of 13%. Wouldn't the terminee get a 1.33% PS alloc, even if the plan has a last day requirement, to satisfy gateway? Also, wouldn't it be possible for both NHCEs to be in the HCE's rate group if the terminee was significantly younger than the other two participants? I recall the testing that I used to see created an EBAR by projecting the current year's alloc to 65 using a set interest rate, dividing by a monthly APR, and then dividing by the participant's comp. If this is the allocations-tested basis, how does the benefits-tested basis differ? TIA for any clarification offered. Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted Wednesday at 10:44 PM Share Posted Wednesday at 10:44 PM If any portion of the plan is cross-tested, then all benefiting NHCEs over 21/1 (those who are not OEEs) must receive the minimum gateway. Call that the over 21/1 'plan'. Those who are OEEs (under 21/1), if tested separately from the over 21/1 plan, are in a group that is almost never cross-tested (call this the 'under 21/1 plan'. Instead, it is contributions-tested, also called allocation based testing, so that 'plan' is not required to get gateway (again, if tested separately from the over 21/1 plan). If not cross-tested, no gateway. If a plan is cross-tested, the benefiting NHCEs must have the minimum gateway (perhaps even more to pass testing overall) but the gateway is not restricted by an allocation conditions like last day or a minimum hours requirement. If the plan is allocations-tested, not cross-tested, the 'EBAR' is replaced for testing with this: the employee's total nonelective allocation divided by the employee's testing compensation. Compare these rates HCEs to NHCEs and the rest of the math is the same. Link to comment Share on other sites More sharing options...
Connor Posted Friday at 12:59 AM Share Posted Friday at 12:59 AM Got it - thanks, John! Link to comment Share on other sites More sharing options...
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