"I have a four person plan. 3 HCE's and 1 NHCE who terminated employment during the year. The plan was set up as cross tested with everyone in their own rate group. In order to receive a profit sharing contribution, you must be employed on the last day of the year. This means that the NHCE will only be entitled to receive the 3% SHNE. If they want to do Profit Sharing on a cross tested basis then we would need to provide an additional 2% to meet the gateway.

"The 5% contribution to the NHCE will only allow a very small profit sharing contribution for one of the HCE's (youngest participant in the Plan). The owner is not happy about the situation. He does not want to amend the Plan to allow for additional profit sharing for the terminated HCE since he is angry that she quit.

"If I allocate the Profit Sharing Contribution on a Comp to Comp basis in order to avoid the general test, will the 3% SHNE to the NHCE be sufficient for 'benefitting' under 410(b)? My first thought is NO since the NHCE is benefitting at a lesser level but I need find some sort of cite that I can show the Owner. Can one of my more knowledgeable peers help me out?"

[Sponsored]

ASC batch-generated documents with integrated batch e-sign and the command center provide real-time visibility into document status, helping you manage the process by knowing what’s sent, signed, and outstanding — without manual tracking or follow-up. See for yourself. 

"I have a large plan that terminated mid-year and all assets have been distributed to the participants. On Schedule H 4i: Did the plan have assets held for investment? (Y/N) Is this question asking 'during the plan year' or 'at the end of the plan year'?"