Gateway Contributions

Should know this but brain freezing ---- plan wants to max out 3 partners and give 2 other partners $20,000 each.  Staff gets 5%.   Employer $$=Profit sharing only, not a SH plan, no match.  Plan is TH. Two Terminated participants not getting the 5% gateway OR TH allocation  because they were not there on the last day.   401(a)(4) fails unless I give staff 9%.   The scenario is very similar to 2018 and it passed with 5% to staff,   no contribution to 1 term'd participant.  Am I missing something?  

Rather,

I doubt if you are missing anything.

Your two terminated employees may have been important factors in passing the 401(a)(4).  Especially, if they are young aged.

I've run into this scenario before.  Usually an analysis of the rate groups will help determine why the change in one year to the next.

Can you 11-g contributions for the terminated employees? 

I am assuming that the plan passes the ratio test under 410(b) but not necessarily ABPT? Failing ABPT usually may require that 401(a)(4) passes utilizing ratio groups.

Have you tried accrued-to-date method as well? How about restructuring?

Just thinking out loud with a fried brain myself.

Thanks Mr. B and Jakyasar-

A couple things to consider:

Are you SURE that 2018 really passed?

Are the method and assumptions you are using exactly the same as 2018?

Of note:  the term'd people do NOT get a TH contribution.  They don't have to get anything if there is a last day rule.  But if they do, they must get at least the gateway.  If the allocation calls for more and there is a last day rule, you need to do an 11-g amendment to get them what they need to pass the test.

3 hours ago, BG5150 said:

A couple things to consider:

Are you SURE that 2018 really passed?

Are the method and assumptions you are using exactly the same as 2018?

Of note:  the term'd people do NOT get a TH contribution.  They don't have to get anything if there is a last day rule.  But if they do, they must get at least the gateway.  If the allocation calls for more and there is a last day rule, you need to do an 11-g amendment to get them what they need to pass the test.

Yes, I am sure they passed in 2018.  Assumptions are the same.  There were 8 NHCEs in 2018 and 5 in 2019.  Yes, I know the term'd people do not get the TH since there is a last day rule.  This plan isn't one where everyone is in their own group--- "all others" are in one group-- meaning non-partners.   They did pass with a 7% to staff.  The issue too, is the ages between the partners and NHCEs are too close.