Plan Eligibility Change

Individually Designed Attorney Drafted Document - Calendar Year End Plan

Prior to 01/01/2019, eligibility for 401(k) and 3% Safe Harbor Non-elective contribution was

No age, 30 days, 1st of month

Effective 01/01/2019 Plan amended 3% Safe Harbor Non-elective and ESOP eligibility to be

The eligibility requirement for participation in this plan is completion 1,000 hours in one Year of Eligibility Service. An Employee in Covered Employment shall become a participant (“Participant”) on the first Entry Date preceding the date the Employee satisfies the eligibility requirements with respect to ESOP Contributions and Safe Harbor Contributions and the first Entry Date following the date the Employee satisfies  the eligibility requirements with respect to all other Employer Contributions. Entry Date for purposes of ESOP Contributions and Safe Harbor Non-elective Contributions means the first day of each Plan Year. Entry date for purposes of all other Employer Contributions means the first day of each month.

Question - What is the SHNE entry date for someone hired on 02/28/2019 and worked 1,256.93 hours? Is it 01/01/2020?

Question-What is the SHNE entry date for someone hired on 06/17/2019 and worked 1,326.69 hours? Is it 01/01/2020?  Do you know how I set up Relius to have it calculate the SHNE?

Question - Do I have to disaggregate the ADP testing since it has dual eligibility in the Plan now?

Plan uses gross compensation (w-2 wages) for testing and allocations.

Thanks,

"first Entry Date preceding" likely means 1/1/19 for your two examples. Yuck.

WCP

I would contact the attorney who drafted the document.

20 minutes ago, Bill Presson said:

"first Entry Date preceding" likely means 1/1/19 for your two examples. Yuck.

WCP

I disagree, Bill.  It says 1,000 hours in one Year Eligibility Service Period.  That period likely ends on the 1 year anniversary (or really the day before) of employment.  So, for both of the examples, the one Year period ends in 2020.

I'm inclined to thing entry date for the ESOp/SH is 1/1/20. Completion of eligibility requirements is 2/27/20. 1st entry date preceding that date is 1/1/20, right? I think the same "logic" - and I use that term loosely - applies to the second situation, so it would be 1/1/20.

I see BG beat me to it.

Yes, you will have to separately test the ADP portion because you will have employees eligible to defer and not get the safe harbor 3%.

To quote Bill, Yuck.

Start watching Top Heavy.  If plan is TH, the employees eligible to defer but don't get safe harbor may be required to get 3% anyway.

2 hours ago, BG5150 said:

I disagree, Bill.  It says 1,000 hours in one Year Eligibility Service Period.  That period likely ends on the 1 year anniversary (or really the day before) of employment.  So, for both of the examples, the one Year period ends in 2020.

BG, could be, but I've seen some documents that don't specify having to wait until the end of the service period. Just says 1,000 hours in the service period. The OP didn't say either.

But I agree with asking the attorney. One of the benefits of having an attorney draft a document.

I have sent the attorney an email regarding the ADP Testing.  The Plan is failing the ADP test.  The refunds total 39,876.81. I will check the Top Heavy status next.  BTW, I was just given the Plan Amendment a couple of days ago.

52 minutes ago, Bill Presson said:

BG, could be, but I've seen some documents that don't specify having to wait until the end of the service period. Just says 1,000 hours in the service period. The OP didn't say either.

But I agree with asking the attorney. One of the benefits of having an attorney draft a document.

The amendment has the following:

The eligibility requirement for participation in this plan is completion of one Year
of Eligibility Service. An Employee in Covered Employment shall become a participant
(“Participant”) on the first Entry Date preceding the date the Employee satisfies the
eligibility requirements with respect to ESOP Contributions and Safe Harbor
Contributions and the first Entry Date following the date the Employee satisfies the
eligibility requirements with respect to all other Employer Contributions. 

Year of Eligibility Service. "Year of Eligibility Service" means(c)

completion of at least 1,000 Hours of Service during an Eligibility Period. A Year of

Eligibility Service is credited at the time the requisite number of Hours of Service is
completed during the Eligibility Period.
Does this help?

I don't see how the ADP test is failing (so badly).

You would run the ADP test for the people who are not fully covered by the SH, you don't have to run an ADP test for the whole plan.

The people who defer and cannot get a SH will almost be eligible to be tested separately.  And unless you have a bunch of newly-hired HCE owners or family, that otherwise excludable group will pass. If you have an owner HCE, then hopefully it won't fail that badly.

I somewhat doubt that you fail the ADP test as most of the employees would be eligible for deferrals and safe harbor based on the previous eligibility requirements. 

The ADP test is only going to look at those employees that were hired after 12/3/2018.  And most, if not all, will be NHCE.  To be HCE for 2019 on a new employee is going to require ownership or ownership attribution.

BTW, Relius does have a preceding entry logic.  You will use the Plan Entry requirements for deferrals and Source Summary Overrides for Safe Harbor and other money types.

BG beat me too it.....:)

27 minutes ago, TPA said:

The amendment has the following:

The eligibility requirement for participation in this plan is completion of one Year
of Eligibility Service. An Employee in Covered Employment shall become a participant
(“Participant”) on the first Entry Date preceding the date the Employee satisfies the
eligibility requirements with respect to ESOP Contributions and Safe Harbor
Contributions and the first Entry Date following the date the Employee satisfies the
eligibility requirements with respect to all other Employer Contributions. 

Year of Eligibility Service. "Year of Eligibility Service" means(c)

completion of at least 1,000 Hours of Service during an Eligibility Period. A Year of

Eligibility Service is credited at the time the requisite number of Hours of Service is
completed during the Eligibility Period.
Does this help?

 

 

Yes. This means my interpretation is right. As soon as someone gets to 1,000 hours, they are eligible. They don't wait until finishing the 12 months. This has yuck all over it.

Just because something is legal doesn't mean it is a good idea.

What's the chance this plan has Participating Compensation? 

40 minutes ago, BG5150 said:

I don't see how the ADP test is failing (so badly).

 

You would run the ADP test for the people who are not fully covered by the SH, you don't have to run an ADP test for the whole plan.

The people who defer and cannot get a SH will almost be eligible to be tested separately.  And unless you have a bunch of newly-hired HCE owners or family, that otherwise excludable group will pass. If you have an owner HCE, then hopefully it won't fail that badly.

OK How do I get Relius to only do an ADP test for only employees who don't receive the SH?  That must be what I am doing wrong for the ADP Test to fail.

I have 4 HCE's - eligible for deferrals and SH - 6.89%

I have 88 NHCE's - eligible for deferrals and SH - .76%

I tested 33 separately

33 eligible for deferrals and 14 eligible for SH - .17%

If you have no HCE eligible for deferral but not for SH, then you pass the ADP test for that group automatically.

3 minutes ago, BG5150 said:

If you have no HCE eligible for deferral but not for SH, then you pass the ADP test for that group automatically.

Experience leads us to this conclusion BG.  I wonder if TPA is needing to "show the work"?

If so, TPA is going to need guidance that we probably can't provide via a chat board.

This is really a Safe Harbor plan design operation and processing vs. an OEE testing scenario.  So I'm thinking that TPA will need to manually exclude everyone in Relius from the ADP test that receives the safe harbor contribution and run the ADP test.  This should give the testing report TPA is looking to have.

I want to thank everyone who responded to my message!

I needed to show my work since the Plan is audited.  I added division codes in Relius.  And then I ran the ADP Test by division to get the report that I needed.