For 1999 plan year, when does a QNEC have to be deposited to satisfy t

[eilano]

A Plan failed the ADP test for the 1999 plan year and is also top heavy. To correct the ADP test and satisfy the top heavy contribution requirement for 1999, the client decided to put in a QNEC. When does the contribution have to be deposited to satisfy the top heavy contribution requirement for the 1999 plan year? Normally, the QNEC would have to be deposited by 12/31/2000 but for top heavy requirements, would the contribution have to be deposited by 9/15/2000?

[rcline46]

A QNEC is treated as an employee deferral for all purposes including restrictions on withdrawals.

Employee deferrals cannot be used to satisfy Top Heavy. Therefore, a QNEC cannot be used to satisfy Top Heavy (nor a QMAC). To do so destroys its position as a QNEC.

The new Safe Harbor rules are something entirely different but your question does not seem to relate to safe harbor plans.

[eilano]

You might want double check your facts by referring to question 13:47 of the 2001 401(k)answer book or Treas. Reg 1.416-1, M-18. QNECs may be used to satisfy the employer's minimum contribution liability to the non-key employees without jeopardizing the status of those contributions as QNECs for purposes of the ADP test.

[dmb]

I agree. QNECs can be used to satisfy top heavy requirements, but I can't help you with the required funding date.

[rcline46]

mea culpa - can use QNECs for Top Heavy.

Deposit would be EARLIER of Qnec or Top Heavy. However we have never found anything relating to deposit of TH contributions! SOme could argue 412 deadline, which we use on clients, but there seems to be no support for this.

Therefore would use EOY of following year as deadline. Note deduction would also be in following year which means 404 limits for the following year apply. Might be a problem.

[Guest]

are you saying the QNEC was deposited, but after 9/15/00?

after 10/15????

If standardized document lets end the discussion because HCEs also receive the QNEC and ADP test will still fail, most likely.

I know you can make the QNEC up to 12 months after the plan year close (even longer under APRSC, but combined with top heavy failure you are talking multiple violations involving most employees and I get shaky knees at that point)

I think you can do the same with top heavy, but I think the issue that comes up is 415. Assuming client was on extension then you have 30 days after the latest filing date to count as annual additions for the prior year.

And then, of course, you have the issue of using current vs prior year ADP testing. I would have to re read the stuff on that to figure it out. Ain't got the time at the moment!

[eilano]

QNEC went to NHCE's only and the QNEC was deposited after 9/15/00. It was deposited 12/2000.

[Richard Anderson]

I agree with rcline46, without any guidance on a deadline for TH contributions, EOY following is probably OK.

But, be aware as Tom Poje points out, the 12/2000 contribution must be counted as annual additions for the 2000 plan year, since it was deposited to late to apply to the 1999 plan year.