FAQ 107: 410b--Failed test. How to bring in terminated employees with highest hours

Problem: I have a plan that has a 1000 hour/last day rule and is failing coverage. We need to bring in 6 people, and the plan document says to bring in the terminated participants with the highest number of hours. How do we do this in ASC?

Solution: The easiest way is to give those employees a unique status code, like "Q". Then go into the Group Definition screen in the general specs and put statuses "P" and "F" in group #A and status "Q" in Group #B - this then places their status in its own group. Then go into the profit sharing source specs and add group "B" in the "Contrib: Groups Elig." field and make sure that they all have enough hours to meet the 1,000 hour requirement. Also, prior to running calculations, make sure that the "Groups Forfeit Non-Vested Benefit" field in the source 2 specs has group "A" in it (i.e. statuses "P" and "F") and not Group # "B" (which is now equivalent to your status "Q"). Then re-run calculations - that should then give them a contribution and show them as benefiting on the coverage test. In addition, if the adjusted employees are terminated employees and the user is printing Valuation Reports (ASC menu - Reports), you will want to change the status code for these employees back to their original status codes prior to the coding adjustment. This will ensure that these employees will be reported in the correct reports as terminated employees.