TAX 9873 Lecture Notes - Lecture 25: Accrual
Document Summary
Plan must first be tested and pass coverage testing under 410(b). Allocation[dc]/accrual[db] (based on the amount of benefit provided) Amendments [if they are highly discriminatory, you fail!! Special rules for deferrals, after-tax contributions and matching contributions: Specific non-discrimination testing is prescribed for deferrals and match under 401(k)/(m) known as the adp and acp tests. These tests are applied to the amount of benefit provided. Design-based safe-harbor allocation or accrual every employee gets the same benefit (percentage of pay or dollar) with an exception for permitted disparity (integration with social security) Generally, the safe harbors operate to allow plans to meet the nondiscrimination in amount requirement without actually comparing accrual or allocation rates. These types of safe harbors are referred to as design based. If the employer is requesting a determination that the plan satisfies the uniform points allocation formula safe harbor, the employer is required to submit a demonstration that the safe harbor is satisfied.
