PS Non-elective Allocation... all HCE employees

[Basically]

Is this correct:

If a business has all HCE employees (each earing well in excess of the HCE compensation limit... in fact in excess of the 401(a)(17) limit), when it comes to allocating a PS NEC contributoin, can the allocation be discriminitory?  Can the owner of the business max out himself and contribute zilch to everyone else? Even pick and choose who might get a NEC contribution?   Seems to be passing the tests when I run them all.  

I've never had this kind of a situation.  If all good, I'm pleasantly surprised (and so will the business owner be).

Thanks

[truphao]

yes, but watch out for minimum TH requirements (if the Plan is TH).

[Lou S.]

If the plan document allows, you can always favor one HCE over another. Plans that cover only HCEs automatically pass testing.

As Truphao points out though you will still make TH minimums if the plan is top-heavy. So in your example, of the owner getting max everyone else getting 0 is fine until your plan becomes top-heavy which could be immediately if its a first year plan with no other money in it, could be never if there is a 401(k) component and you have enough non-key HCEs contributing enough to the plan to keep it below 60%.

And while you say this is a PS, you still need to look out for 401(a)(26) if it's a DB plan or DB/DC combo plan.

 

 

[Basically]

51% top heavy now so all good there.  Yes, I will keep an eye out for that in the future.  

Thanks!

[John Feldt ERPA CPC QPA]

And just a reminder, the HCE determination for the year is not based on what they earned that year, it’s based on what they were paid in the previous year. And check the document to see how the top paid group election is defined. 

[CuseFan]

and that the document allows for the allocation in the manner you propose