combo plan testing - gateway requirement

Looking at a combo plan design for someone and also having a brain freeze for a change.

3% non-elective SH + PS. Gateway determine at 7.5%

DC plan eligibility is 6 months with the following month as the entry date for all sources.

PS is 1000+ hours and last day rule. Allocation method is each participant is their own group.

I see a terminated employee with DOH 1/1/2020, enters the DC plan on 7/1/2020 and terminates 8/1/2020. They worked over 1000 hrs.

They get the SH but they also need to get the 4.5% PS allocation for gateway, correct? The software is forcing it to be provided.

The plan will not pass otherwise excludible testing.

Thank you

Yes.  The employee would need to get a sufficient amount to pass the gateway.

The conundrum with a cross tested plan with 3% safe harbor is that the allocation conditions really go out the window because they are receiving 401a dollars at the 3% safe harbor level, causing them to be in the gateway.  401a dollars have to pass gateway before you get to nondiscrim testing.  Contrast that with a plan with no safe harbor dollars 3%.  the terminated employee would have no 401a dollars and would not be in the gateway.

My curiousity is getting the best of me.... the plan doesn't pass nondiscrim unless the employees are receiving a 7.5% total?  Normally, the gateway will pass with 1/3 or 5%.  but you may have to bump up the employees to total of 7.5% to get nondiscrim to pass.  Is there mostly young HCEs?

29 minutes ago, Mr Bagwell said:

.. the plan doesn't pass nondiscrim unless the employees are receiving a 7.5% total?  Normally, the gateway will pass with 1/3 or 5%.  but you may have to bump up the employees to total of 7.5% to get nondiscrim to pass.  Is there mostly young HCEs?

It's a combo plan so the gateway is higher.

Ah.   Thanks.