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austin3515

403b and 401k / Aggregation of ER Contribs for Testing

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403b plan covers only HCE's, and 401k plan excludes HCE's. Both plans have uniform match. I assume I can aggregate the ACP Test? Both plans provide for same nonelective contribution, which I assume would still be able for the design based safe harbor (or at least aggregation is permitted for testing, which will pass because everyone has same allocation rate)?

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why not treat them as separate plans each meeting the 401m requirements?

Reg 1.401(m)-2(a)(1)(iii) provides that a plan with only HCEs is deemed to satisfy the ACP test. So the 403b plan will meet the requirements for ACP testing under reg. 1.403(b)-5(a)(1).

The 401k plan will meet the requirements for ACP because it only covers non hces..

I don't know if you can aggregate the two plans under the rules of 1.410(b)-7(a) since one is a 403b and the other is a qualified plan.

second even if the two plans can be aggregated under 1.410(b)-7(a) I don't think aggregation could be applied to combine contributions to the 403b plan with the 401k plan if an HCE is not eligible to participate in the 401k plan. See reg .401(m)-2(a)(3)(ii) which states that HCE must be eligible to participate in more than one plan in order to aggregate contributions.

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If what you're saying is true, here is a great plan design - give the HCE's a matching contribution = 200% of the first 5% and a nonelective of 10% of pay!

That can't possibly be true, can it?

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Issue I see is that 403b plans are not qual plans and operate under their own rules in a parallel universe with 401k plans for the employees covered under the 403b plan.

I have given you cites to 2 regs indicating that the two plans are not aggregated. You should check the preamble to the 403b regs and 401m regs to see if their a specific reference to this issue.

See recent link to discussion of aggregating 403b with 401k contributions

http://benefitslink.com/boards/index.php?/topic/54562-401a4-and-403b-plan/

I don't have any more information.

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Anyone have any new light to shed on this topic? I am dealing with it again. Can I aggregate employer contributions for testing between the two plans.

The EOB points out that 1.410(b)-7(f) says

(f) Section 403(b) plans. In determining whether a plan satisfies section 410(b), a plan subject to section 403(b)(12)(A)(i) is disregarded. However, in determining whether a plan subject to section 403(b)(12)(A)(i) satisfied section 410(b), plans that are not subject to section 403(b)(12)(A)(i) may be taken into account.

And then 1.410(b)-7(d) says:

(d) Permissive aggregation for ratio percentage and nondiscriminatory classification tests

(1) In general. Except as provided in paragraphs (d)(2) and (d)(3) of this section, for purposes of applying the ratio percentage test of § 1.410(b)-2(b)(2) or the nondiscriminatory classification test of § 1.410(b)-4, an employer may designate two or more separate plans (determined after application of paragraph (b) of this section) as a single plan. If an employer treats two or more separate plans as a single plan under this paragraph, the plans must be treated as a single plan for all purposes under sections 401(a)(4) and 410(b).

So (f) says I can aggregate for coverage, and (d) says if in fact I do that I need to aggregate for all purposes under 401(a)(4).

So I think I've done it? I've proved beyond the shadow of a doubt that I can aggregate for testing when testing the 403b? I can see that this could be cumbersome in some situations because the permission to aggregate does not go in both directions, but because my 401k plan excludes HCE's I don't need to do anything special anyway with that plan. And of course, the whole point of having both plans is generally for this precise design.

Thoughts?

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Nicely done. Even though it's out of date, you might look to notice 89-23 for an added measure of comfort.

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so lets say you aggregate the plans. in you original example

under the 403b the HCEs get 200% of the first 5%

the NHCE get something less than that in the 401k.

how does BRF for the match pass?

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