FAQ 105: 401a4--Not using post-entry compensation as I selected

Problem: I'm having trouble with the 401(a)(4) test on a cross-tested calendar year plan. The plan has 3 participants who entered 10/1/04 and I have input their pre-entry comp. I also changed the Compensation Definition specs to say that pre-entry comp has been input and that it should not be included for any of the money sources. I allocated the employer contribution using groups and a formula (the system is allocating the contribution correctly based on post-entry comp). When I run the 401(a)(4) test, I select to use post-entry comp under the compensation options and also under the gateway options. The gateway shows the correct percent based on post-entry comp, but the annual accrual rate is based on full year compensation. How do I get the system to calculate the annual accrual rate based on the post-entry comp rather than full year comp?

Solution: It may appear that it is not using post-entry comp because of the way the system calculates monthly comp. It is calculated based on how the user answers the test setup questions "Use Post-entry" and "Use Actual Mos". The system's accrual rates are determined using a monthly compensation figure. To arrive at that figure, the system divides the annual (or post-entry if selected) comp by the selected number of months (actual or always 12). For details on the calc, along with samples, refer to the Miscellaneous Notes section of our 401(a)(4) documentation on our website. If you do not have this document, you can download it from our website. I believe if you deselect the "Use Actual Mos." option, that you will see the results you expect.