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Posted

Hi

Cannot think straight on this issue so need to ask.

Sponsor FY is 7/1/2020 to 6/30/2021 and the DC+CB plans are the same period.

Working with a DC person and set up a CB plan for 7/30/2020 year end and did not need to aggregate the plans for testing. For the 6/30/2020 year end, the compensation was FY of the corporation under the CB plan. It just worked.

I just got a copy of the updated document for the DC plan (signed 12/1/2020) and noticed that the compensation is checked as calendar year ending within the FY.

So I have 2 plans to test but 2 different compensation definitions. I must aggregate the plans for this year, do not have a choice.

Any suggestions on what to do? I am trying to have them change the definition of compensation (may also need the HCE determination but this is another story).

How can I test 2 different compensation definition?

Thank you

QKA, QKC, QPA, CBS

Posted

Do you need to revise any of the dates in your post?

In general, the definition of compensation used for allocations does not need to be the same definition used for testing.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

Posted

Yes, i/o 7/30/2020, it is 6/30/2020.

I understand that you can use different definition for testing but how about 2 different plans by the same sponsor using 2 different compensation periods? Isn't this an issue for deductions?

Anyway, I am having them amend the plan and match the cb plan. I love KISS method.

QKA, QKC, QPA, CBS

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