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I suspect it will depend on whether the company has used this type of payment for other reasons. For example, the company already could offer incentives tied to achieving certain goals in wellness programs, or the company could have a history of sending holiday gifts cards. If payroll already has experience with small incentive payments, then this will be just another one. If payroll does not have that experience, then this likely will be an onerous task for them. It will be interesting to see how many companies that do decide to offer financial incentives wind up messing up the calculation of plan compensation.

Apparently it was planned maintenance.

People who design their plans such that the HCE's receive the SH deserve their fate.

Richard, my version is the 5th edition, copyright 1999. The article starts on page 579. It's tough to find materials that address these issues as in as much depth. It's titled "Planning Opportunities to Maximize Benefits for Key Employees Under Qualified Defined Benefit Plans", but it covers cross tested DC plan testing as well. Well worth locating. And, let's thank Mike Preston for lending his expertise to the discussion as well. Kind of like the old EF Hutton Commercials, "when EF Hutton speaks, people listen".

Andy, I have been doing my own analysis of the regs and I agree with you. 1.401(a)(4)-9© says that "If each of the component plans of a plan satisfies all of the requirements of section 401(a)(4) and 410(B) as if it were a separate plan, then the plan is treated as satisfying section 410(a)(4)." If component plan A is treated as separate plan, I don't think that would mean that you could exclude from testing (either 410(B) or rate group) all the employees that are not eligible for component plan A. All non-excludible eligibles (both A & b) are included in the testing in the denominator, but only those benefiting in the component plan are included in the numerator for that component plan. I have the 1998 version of "Current Topics for the Retirement Plan Consultant" at home somewhere. I'll see if I can find the article. After looking closely at this I see, as Mike points out, that the excluded HCE is a non-issue. In both the 410(B) and rate group testing this person will be in all denominators and will not be in any numerator. This is true whether he is assigned to component plan A or B. Thanks everyone for your help.