Use of the modified average benefit test in applying 401(a) non discri

[Guest khaskell]

I am currently testing a new comparability formula under the final Regulations adopted in 1991. Under these regulations, there are two parts required for use of the average benefit test. 1). The plan must pass the ABP test of 410(B)-5 and 2). Each rate group must satisfy a modified coverage test under Reg. 1.401(a)(4)-3©(3). Part 1 is easy enough to test, but Part 2 is a little confusing. Am I correct in that each rate group only has to be at least as great as the lesser of the NHCE midpoint or the plan's ratio %? For example, if Rate group #1 has ratio % of 45% (which clearly fails the ratio % test), and a midpoint of 21.88% (95% NHCE Concentration), does Rate group #1 pass the modified facts and circumstances portion of the Average Benefit Test? (assuming Plan passes plan ABP test of part1).

These testing seems to stretch the interpretation of new comparability testing. I am hesitant to proceed further with any plan designing since this modified testing is not "in the normal testing parameters" as well as the Treasuries current inquiries.

Any insight would be much appreciated.

[rcline46]

First, the regulations were revised in 1993, and I can't believe you are actually testing in a year prior to 1994 at this date.

However, the use of the midpoint between the safe and unsafe harbor rules for each rate group is acceptable and what we all use for cross tested plans.

[Guest khaskell]

Rcline46: Do you know the exact 1993 revision? I do plan on holding off on the final plan design until the Treasury makes their final revisions hopefully before year end, but I just want to show the client allocations based on current testing standards and I have only run tests using the ratio percentage.

Thanks.