30Rock Posted October 31, 2013 Share Posted October 31, 2013 Lets say that you have a 401k plan and a 403b plan in the same controlled group. Both plans have deferrals, match and nonelective. The 401k plan can satisfy coverage for purposes of deferrals and match under 1.410(b)-6(g) by excluding the 403b plan. However lets say the 401k plan has a tiered nonelective formula requiring 401(a)(4) testing. When running the average benefits percentage test, do you pull in the match and nonelective - ie all employer contributions, even though you were allowed to exclude the match doing the coverage test? I think deferrals continue to be excludable. Thanks for any thoughts! Link to comment Share on other sites More sharing options...
Tom Poje Posted October 31, 2013 Share Posted October 31, 2013 as close as I've come to seeing an answer is from the ASPPA Q and A 2009 Q and A 20 (and again, such response do not represent an actual position ............. Q: If matching or nonelective contributions to a 403(b) plan are used in the average benefits percentage test to satisfy the IRC §410(b) coverage requirements, are the 403(b) deferrals included in the average benefit percentage calculation as well (even though 403(b) deferrals are not generally subject to nondiscrimination testing)? IRS Response: Yes (The old copy of the 403b Answer Book I have (1996) said to include all contributions, including deferrals from the 401kplan, but it was unclear how to handle the deferrals from the 403b Link to comment Share on other sites More sharing options...
30Rock Posted October 31, 2013 Author Share Posted October 31, 2013 Ughh I have links from 2010 that state the opposite with a comment from you. Not for profit with 401(a) and 403(b), Average benefit test rcline46 Post #1 Registered User Group: Sitewide Moderator Posts: 1,589 Joined: 24-February 00 Member No.: 3,694 Not for profit has a deferral only 403(b) and a 401(a) with 'varying' contributions by person. Since 2002 even Not for Profits have had to pass discrimination testing. Oh by the way - we are taking the plans over for the 6/30/2010 year.... As I read 415, we aggregate the 403(b) deferral with the 401(a) contribution to test maximum annual additions. Indications are this was 'overlooked' in the past so I am asking for confirmation on this point first. Since the 401(a) contributions are such that they cannot make any safe harbor formula, and they cannot pass general testing on a contributions basis, I now go to cross testing. IF (that is a big IF because I do not know the results yet) each rate group does not pass 70%, I will need to perform the Average Benefits Test. If I have to do the ABP, then again I include the deferrals into the 403(b) plan, correct? My thoughts are yes and yes, but I am willing to listen to rebuttals. lippy Post #2 Registered User Group: Registered Posts: 125 Joined: 14-March 06 Member No.: 15,912 I don't think 403(b) deferrals are ever included in any nondiscrimination test, including the average benefits test. rcline46 Post #3 Mar 17 2010, 05:40 PM Mar 18 2010, 07:11 AM Mar 18 2010, 07:36 AM Registered User Group: Sitewide Moderator Posts: 1,589 Joined: 24-February 00 Member No.: 3,694 I guess technically 415 is not a discrimination test, only a compliance test. SO you do agree it is in the 415 test? lippy Post #4 Registered User Group: Registered Posts: 125 Joined: 14-March 06 Member No.: 15,912 Sorry, I missed that part of the original post. IIRC, a 403(b) account is considered individually owned for 415 purposes, so the 403(b) plan contributions and the 401(a) plan contributions of the non-profit would not be combined for 415 purposes (i.e., separate limits for the two plans). However, if an employee of the non-profit owns a business of his own (at least 50%, I think), then any qualified plan sponsored by that business would share a 415 limit with the 403(b) account. Keep researching - I'm not 100% sure of my memory on this. Of course, the individual had one 402(g) limit. rcline46 Post #5 Registered User Group: Sitewide Moderator Posts: 1,589 Joined: 24-February 00 Member No.: 3,694 When the plans are sponsored by the same employer, I don't think 415 would allow $49,000 in the 401(a) plan PLUS $16,500 in the 403(b) PLUS any match or non-elective contributions in the 403(b). Bird Post #6 Registered User Group: Sitewide Moderator Posts: 2,028 Joined: 23-June 04 Member No.: 13,348 Yes, I think deferrals are in the 415 test, not in the rate group test, and in the ABT. Mar 18 2010, 08:41 AM Mar 18 2010, 10:45 AM Mar 18 2010, 11:33 AM Mar 18 2010, 11:42 AM lippy Post #7 Registered User Group: Registered Posts: 125 Joined: 14-March 06 Member No.: 15,912 Re ABT, check out Reg. 1.403(b)-5(a)(2) and the ERISA Outline Book, footnote 138 on page 1B.498 (2009 ed.) Re 415, look at Reg. 1.403(b)-4(b), Code Section 415(k)(4) and EOB p. 1B.512 (2009 ed.) rcline46 Post #8 Registered User Group: Sitewide Moderator Posts: 1,589 Joined: 24-February 00 Member No.: 3,694 lippy, did I tell you I HATE REGLATIONS!!! 1.403(b)-4(b) does not seem to be relevant as I am not testing the 403(b), the test is in the 401(a), and the 415(k)(4) is not relevant as there is only 1 organization involved. What little I can glean, is that the 403(b) deferrals ARE included in the 401(a) 415 test. Actually it would seem there is only one 415 test which is not related to plan type. Would be nice see something that says that, but my search skills on the BNA site don't seem to match the way they present stuff. As for the references for ABP - not testing 403(b), but I see deferrals are not included in the discrimination testing for 403(b). There EOB references - don't have the 2009 EOB, have 2008 and page numbers don't seem to line up. Tom Poje Post #9 Moderator Group: Sitewide Moderator Posts: 4,791 Joined: 26-August 98 From: Florida (land of hot humid summers) Member No.: 1,560 Question 10 from the 2008 ASPPA Conference: If matching or nonelective contributions to a §403(b) plan are used in the average benefits percentage test to satisfy the IRC §410(b) coverage requirements, are the §403(b) deferrals included in the average benefit percentage calculation as well? You should exclude salary deferrals from ABT test. See Treas. Reg. §1.403(b)-5. lippy Post #10 Registered User Group: Registered The 415 bit is on pp. 1.899-900 of the 2008 EOB. The ABT footnote is not in there - it was added in the 2009 book. Come to think of it, I first met this issue before the 2009 books were out, and I recall the older books weren't very helpful. I did some research elsewhere and determined that while the issue was unclear, Not for profit with 401(a) and 403(b) - BenefitsLink Message B... Page 3 of 6 http://benefitslink.com/boards/index.php?showtopic=44993 10/6/2011 Mar 18 2010, 11:45 AM Mar 18 2010, 01:23 PM Mar 18 2010, 02:42 PM Posts: 125 Joined: 14-March 06 Member No.: 15,912 the case that 403(b) deferrals are never included in a 410(b) or 401(a)(4) test was more convincing. Then the 2009 books came out with the footnote that supports that position. The footnote refers to an IRS comment at the 2008 ASPA conference. If I can find my research and it's not copyrighted material, I'll post it. Won't be today though because I have some very urgent business to tend (yeah, I have to get to the liquor store and back before basketball starts). Maybe one of the real 403(b) experts (i.e., not me) on these boards will chime in with some enlightenment. Were's John Simmons? lippy Post #11 Registered User Group: Registered Posts: 125 Joined: 14-March 06 Member No.: 15,912 Tom beat me to it. That's the Q&A I mentioned (although the footnote says Q&A 9 - don't know if that's a typo or if that one addresses it, too). Tom Poje Post #12 Moderator Group: Sitewide Moderator Posts: 4,791 Joined: 26-August 98 From: Florida (land of hot humid summers) Member No.: 1,560 it is #9, I mis-read the format of the spreadsheet rcline46 Post #13 Registered User Group: Sitewide Moderator Posts: 1,589 Joined: 24-February 00 Member No.: 3,694 Now I am really messed up! That is what I get for reading regulations. It would seem that 403(b) employER contributions are separate from 401(a) employER contributions when doing a 415 test within the same employer and it does not appear to have changed with the final 403(b) regulations. What a deal! That leaves the elective deferral. Now I am not sure the elective deferral is counted in the 415 limit for the 401(a) plan - is it real or is it Memorex? Is it an employEE or employER contribution for this purpose? Or does it matter? As I said to lippy before, I want clarity! The regs actually say in 415 what is included and to some extent what is excluded, but the 403(b) contributions are not mentioned! Only in Not for profit with 401(a) and 403(b) - BenefitsLink Message B... Page 4 of 6 http://benefitslink.com/boards/index.php?showtopic=44993 10/6/2011 Mar 18 2010, 03:23 PM Mar 18 2010, 03:45 PM « Next Oldest Cross-Tested Plans Next Newest » the 403(b) regulations discussing 403(b) compliance and discrimination are the deferrals mentioned. Does this mean they deferrals are excluded in checking 415 in 401(a) plans? dmb Post #14 Registered User Group: Registered Posts: 529 Joined: 15-May 00 Member No.: 4,140 QUOTE (rcline46 @ Mar 18 2010, 02:42 PM) Now I am really messed up! That is what I get for reading regulations. It would seem that 403(b) employER contributions are separate from 401(a) employER contributions when doing a 415 test within the same employer and it does not appear to have changed with the final 403(b) regulations. What a deal! That leaves the elective deferral. Now I am not sure the elective deferral is counted in the 415 limit for the 401(a) plan - is it real or is it Memorex? Is it an employEE or employER contribution for this purpose? Or does it matter? As I said to lippy before, I want clarity! The regs actually say in 415 what is included and to some extent what is excluded, but the 403(b) contributions are not mentioned! Only in the 403(b) regulations discussing 403(b) compliance and discrimination are the deferrals mentioned. Does this mean they deferrals are excluded in checking 415 in 401 (a) plans? FWIW, we have some not-for-profit organizations with the same setup, 403b for deferrals, 401a for employer contributions. After reviewing regs mentioned in this string, we came to conclusion that 403b and 401a are treated as two separate entities for 415 as well as 410b testing, so we think a participant can defer $16,500 in 403b and receive $49,000 in 401a. Tom Poje Post #15 Moderator Group: Sitewide Moderator Posts: 4,791 Joined: 26-August 98 From: Florida (land of hot humid summers) Member No.: 1,560 you might want to check http://benefitsattorney.com/modules.php?na...wpage&pid=1 she has posted this chart the last few years as I understand it, other plans are counted when looking at the 401 Unless its a govt 401k) but not when looking at the 403b Enter Keywords Search Topic 2 Pages 1 2 > Link to comment Share on other sites More sharing options...
30Rock Posted October 31, 2013 Author Share Posted October 31, 2013 Ok maybe I should start over because I think I messed up the question - so under the 1.410(b)-6© exception I can exclude the 403b plan employees when testing the match and deferrals for coverage under the 401k plan. But I still have to pass coverage for the nonelective piece under the 401k plan without aggregating with the 403b because I am not allowed under the regs to use the 403b to help me pass coverage. So if my nonelective fails RPT, when I do the ABT does the match and nonelective percentages in the 403b plan come over as 0, or can I count the match? And part 2, if I am doing 401(a)(4) on my nonelective in the 401k plan, can I use the match and nonelective benefit percentages in the 403b plan or are they still not permitted to be aggregated and they come in as 0 here too? Thanks! Link to comment Share on other sites More sharing options...
Tom Poje Posted November 1, 2013 Share Posted November 1, 2013 I simply don't recall. I have the vaguest memories of a comment being made that it depends on whether you are looking at the 401k plan or the 403b plan, but I can't find my notes on that. I looked back at 2008 Q and A and the comment not to include the deferrals was ASPPA comment and the IRS did not respond. 2009 was the same question and this time the IRS responded to include the deferrals, so I agree, it is very confusing. If I get a chance I'll try to see if I can find something more. Link to comment Share on other sites More sharing options...
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