Cash Balance/Profit Sharing Testing Question

Have a new client where they have both a Cash Balance and Profit Sharing Plan:

• Profit Sharing is immediate entry
• Cash Balance is 21 & 1 (1/1 & 7/1 entry dates)

So we have people eligible for the Profit Sharing and not the Cash Balance.  When we do the testing for both plans (like the Rate Groups), do we include the people who are in just the Profit Sharing Plan?  I just wanted to confirm, because those profit sharing contributions significantly help the testing.

Thanks in advance!

Yes, you'd include everyone, and so it sounds like everyone'll be getting gateway.

3 minutes ago, Bri said:

Yes, you'd include everyone, and so it sounds like everyone'll be getting gateway.

Perfect!  Yea, everyone is going to get about 6% into the Profit Sharing.  I just wanted to make sure their Profit Sharing also gets included in the Rate Group testing (EBAR) since they weren't included in the Cash Balance

You can test otherwise excludables separately.

Exactly, you can test everyone or you can parse out the PS-only people. If you include everyone, make sure the PS-only get the full combined gateway in their PS. You mention 6% - is that the gateway percentage?

I think that's what the prior people had been doing, but I haven't reviewed it yet.

Generally 7.5% is the "safe harbor" number, isn't it?

7.5% is the maximum that a combo gateway percentage can be. It can be 5%, 6%, 7% or 7.5% depending on the highest aggregate normal allocation rate for any HCE.

As Mike and Cusefan indicted, the otherwise excludable employees do not have to get the gateway, but they would get the DC plan top-heavy minimum (if top-heavy). They don’t get a gateway if you are “testing” the OEEs separately from those over 21/1/1000etc. and if that separately tested OEE group can pass nondiscrimination testing on some basis other than cross-testing. Remember, the gateway merely allows the nondiscrimination test to be done on a benefits-tested basis, that does not mean you pass just because you provided the gateway. 

On 3/8/2022 at 5:13 PM, CuseFan said:

Exactly, you can test everyone or you can parse out the PS-only people. If you include everyone, make sure the PS-only get the full combined gateway in their PS. You mention 6% - is that the gateway percentage?

And the parsed out group gets tested by themselves, right?  That would usually an easy pass, but one should make sure.

Exactly right. Normally it’s all NHCEs, deemed pass. 

To be fair, the original poster liked having those PS amounts in his testing - seemed like he was happy to run just one test rather than disaggregating.