Age weighted and 401(a)(4) non discrimination Testing

This is my first time working on an age-weighted profit-sharing allocation.

The plan includes 5 participants: 1 HCE and 4 NHCEs. The plan effective date is 01/01/2021. The Normal Retirement Age (NRA) condition is age 65 with 5 years of service from the date of plan participation. The plan year ends on 12/31/2024, and it is not top-heavy for the current year.

After allocating profit sharing, the plan fails the 401(a)(4) nondiscrimination test.

The issue arises with the HCE participant, who is 70 years old and was hired on 07/05/2022. In the age-weighted allocation calculation, we initially used 2 years to NRA for the HCE, resulting in a significantly higher EBAR compared to the NHCEs—causing the plan to fail 401(a)(4).

However, based on Treas. Reg. § 1.401(a)(4)-8(b)(1)(ii), it appears permissible to cap the current age at 65 for participants who have already reached 65 age. While apply 0 years to attain NRA for the HCE (instead of 2), the plan passes the 401(a)(4) test.

My questions are:

Can we apply the age 65 cap for participants who are already past the plan’s NRA, in accordance with the regulation cited?

Can we change the HCE’s date of birth to reflect age 65 and revise the hire date to 2020 to help the plan pass testing purpose only —and is this permissible under any Treasury regulations?

Does the HCE need to satisfy the 5-year participation requirement to be considered as having attained NRA under the plan's definition?

Is there any regulation that allows us the years of participation (similar to how the NRA age can be capped at 65) to help normalize the EBAR calculation and pass nondiscrimination testing?

Any insights or guidance to help us accomplish a compliant allocation would be greatly appreciated.

Thank you in advance for your help.

What does the document itself say about the allocation?  Age-weighted plans are supposed to pass 401a4 by design, as long as you pass coverage.

3 hours ago, Bri said:

What does the document itself say about the allocation?  Age-weighted plans are supposed to pass 401a4 by design, as long as you pass coverage.

@Briage weighted allocation on the basis of 8.5% interest for all employees and no allocation condition for Profit Sharing. Coverage result may be, total number of hce 1 and benefitting is 1 and total number of nhce 4 and benefitting is 4. Ratio is 100%, plan will pass coverage I think so.

Seems typical enough - does the document give you the specific factors to multiply their compensation by?  Those are supposed to make it so that when you run the general 401a4 test, everyone gets the exact same EBAR.  (So your rate group is supposed to be 100%.)