Control Group Testing Issue

[Guest jkrad]

When you have a control group do you test each plan separately for the ADP/ACP or are they aggregated?

[Tom Poje]

if you aggregate for coverage, you MUST aggregate for ADP test

(or vice versa since some people run the ADP test first)

don't get confused on the term aggregated

whether you aggreagte or not all bodies are treated as being employed by one employer, hence all will show up in the denominator for coverage.

if you aggreagte, one adp test, all employees

if you dont aggregate, 2 ADP tests, only those employees actually eligible

[Guest TomHensch]

Today is Tom Poje's Birthday.

Happy Birthday Tom!!!!!!!!!!

[Guest sb actuary]

Tom Poje -- Because its a controlled group, the employers are deemed to be one employer. Even though there are separate plans, aren't the separate plans most likely deemed to be one plan under 414(l) regs. That being the case, aren't you required to aggregate? What's the legal reasoning for your statement that the employers can choose not to aggregate?

Thanks.

[Mike Preston]

I think I'd ask the question in reverse. What is the citation under 414(l) that calls for aggregating separate defined contribution plans of the employer into one plan for coverage purposes?

[Tom Poje]

1.410(b)-7(d) says that an employer MAY designate 2 or more plans as a single plan. (permissive aggregation.) it then further states if treated as a single plan, it must do so for all purposes of 401(a)(4) and 410(b).

I guess I should add, plans must have the same plan year

[rlb64]

If the controlled group consists of 2 firms and each has their own plan with different plan years, how is coverage run? Is coverage run as though the other doesn't have a plan?

[Tom Poje]

my brain hurts, but I think the answer is yes and no.

If different plan years you treat all the other ees as includable and not benefiting.

But for average benefits % test you do average them in.

note: even if plans have same plan year, you cant exclude terminees < 500 hours from the non prticpating plan cuz that rule only applies to actual participants.

[Mike Preston]

Essentially, yes. However, for ABT purposes they are tested together (you test the years that end in the same calendar year together).