kmhaab Posted November 7, 2017 Share Posted November 7, 2017 Company A and Company B are owned by the same individual and each have their own 401(k) plan (lets' call them Plan A and Plan B. Nondiscrimination testing has been done on a controlled group basis. It has come to light that the testing was not done correctly with respect to Plan A for the past several years - union and nonunion employees were not tested separately as required. Plan B has no union participants. The testing is in the process of being redone correctly. What are the risks to Plan B in this situation? If they fail to pass the tests now, when Plan A's union/nonunion employees are disaggregated correctly, is this a failure to pass for Plan B? I presume it would be, but what if the actions taken to get the plans to pass apply only to Plan A (i.e. Plan A makes QNECs)? Since we're talking about prior plan years, does Plan B have to file with VCP since they failed the nondiscrimination testing and didn't correct within the designated time period? Even if the correction actions are to be taken by Plan A only? Link to comment Share on other sites More sharing options...
ETA Consulting LLC Posted November 8, 2017 Share Posted November 8, 2017 Don't jump to conclusions without retesting the plans. If B can pass as a standalone plan, then B wouldn't have an issue. If B actually needs to be aggregated with A in order to pass, then the issues "may" begin. Your first step is to prove each plan (either as a standalone or permissively aggregated with the other plan) passes the required nondiscrimination tests. It may end up being a non-issue. Good Luck! CPC, QPA, QKA, TGPC, ERPA Link to comment Share on other sites More sharing options...
kmhaab Posted November 9, 2017 Author Share Posted November 9, 2017 Thank you for your response. To clarify, what if B passes as a stand alone plan, but A does not pass either as a standalone plan or when aggregated with B? Can one plan pass as a standalone and the other as aggregated? Historically, they have been aggregated and Plan A has had to make QNECs to Plan A to NHCEs employed by the sponsor of Plan B (i.e. giving them a benefit in Plan A) in order to pass. If Plan A must do that for a prior year, and file a VCP, it wouldn't affect Plan B if Plan B passes on it's own - is that correct? Link to comment Share on other sites More sharing options...
Mike Preston Posted November 12, 2017 Share Posted November 12, 2017 What you have said makes absolutely no sense. There is no structure which calls for "QNECs to Plan A to NHCEs employed by the sponsor of Plan B (i.e. giving them a benefit in Plan A) in order to pass." Why wouldn't those QNEC's be paid to Plan B? Somebody needs to hire somebody who understands non-discrimination testing. Link to comment Share on other sites More sharing options...
kmhaab Posted November 14, 2017 Author Share Posted November 14, 2017 Thanks, that was very polite and helpful Mike. Doghouse 1 Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now