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Component Plans: Another Way to Design a Cross-Tested Plan [2019]
Presentor: David Schultz Recorded Date: 4/22/2019 Duration: 100 Min.

This program was recorded during a live presentation given on April 22, 2019 at 12:00PM EST.

In designing a cross-tested plan or in addressing nondiscrimination failure, one of the more overlooked “correction” tools is restructuring. Restructuring permits the practitioner to divide the plan into two or more component plans that can be tested separately for nondiscrimination. For example, the practitioner might restructure the plan so that younger highly compensated employees (HCEs) and older nonhighly compensated employees (NHCEs) are in a component plan while the older HCEs are in another component plan with the younger NHCEs. A practitioner might also add flexible family members (family members around whom the employer is not designing the plan) to the plan and then restructure the plan into component plans that facilitates passing nondiscrimination.

With the use of restructuring, practitioners may be able to establish a cross-tested plan for an employer where such a design was thought not possible. The practitioner also may be able to use restructuring to reduce the employer contribution costs for a cross-tested plan. This 100-minute Webcast uses illustrations to help you gain a better understanding of the rules for using restructuring.

Topics include:
  • Using restructuring in testing
  • Dividing into component plans
  • Plan language
  • Correction options
  • Deadlines for corrective action
  • General nondiscrimination testing in component plans
  • Restriction in creating component plans
  • Impact on 401(k) plans
  • Minimum gateways
  • Effect on top heavy

There are no prerequisites or advance preparation for this program. However, the instructor will assume attendees have at least one year of experience.

Level: Intermediate
Instructional Delivery Method
Group – Internet-Based

NASBA Field of Study: Taxes

Speaker: David Schultz, J.D.

Objectives: After attending this Web seminar, an attendee should be able to:

  1. Identify the situation where a practitioner may use component plans
  2. Apply the rules for restructuring
  3. Design a plan that is able to take advantage of restructuring
  4. Determine where to “draw the lines” for the component plans
  5. Explain the benefits of restructuring
  6. Determine how restructuring affects coverage, minimum gateways and top heavy
  7. Identify the various options for “rescuing” a cross-tested plan
  8. Identify the deadlines for taking the respective corrective actions
  9. Determine how to apply the general nondiscrimination test in component plans

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