Purplemandinga

Nondiscrimination choices a settler function?

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Quick question.

Is the choice to disaggregate otherwise excludable employees or to test nondiscrimination using full year compensation vs compensation earned upon entering the plan a settler function? Since these choices are not choices to select in the adoption agreement but rather granted for use in the basic plan document.

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Not really, because you're only proving that the plan does not discriminate in favor of HCEs (e.g.against NHCEs).  So, ideally, when testing a plan, you're continuing to use allowable methods until that proof is produced.

Good Luck!

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It may depend on whether the plan document gives the power to elect to the employer or the "administrator," although typically the two are the same, i.e., the employer. If it give the power to the employer, then the employer may or may not choose to exercise the discretion, and in reaching its decision is not bound by any fiduciary constraints. If it gives the power to the administrator, as such, the administrator must probably exercise it as a fiduciary and is found to exercise the power in favor of participants, e.g. by retaining maximum amount in plan.

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So in this case the plan document specifically mentions the "Plan Administrator" as the decision maker for these choices. Being so, the choice to select the testing option is necessarily a fiduciary one, and the choice to test would be the choice that grants the greatest benefits to participants. It would appear that there isn't much of a "choice" here then. Thanks for the clarity Luke.

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