JPete

I'm trying to fix a coverage problem and will have to go through EPCRS because of the multiple years involved. Two employers, two separate 401(k) plans. For the deferrals component using the ratio percentage test, Plan A passes coverage (safe harbor plan), and Plan B fails (not a safe harbor plan). I cannot permissively aggregate because Plan A is a safe harbor plan. Average benefits test is less than 50%. No language in plan documents about how to fix this coverage issue. Question: To pass the average benefits test, the Plan B employer needs to make QNECs but to which NHCEs? Employees who are eligible to participate in Plan B but made no deferrals? In the controlled group, I have 192 NHCE (172 in Plan A plus 20 in Plan B) and 11 HCE (8 in Plan A plus 3 in Plan B). Thank you.

OK I will confirm the average benefits test is met by considering all employees of all 3 controlled group members (and for the 2 members for the years during which there were only 2 members of the controlled group). Assuming that average benefits test checks out, and assuming each of controlled group members passes the ADP/ACP testing individually, then I will not aggregate Plan 2 and Plan 3 for ADP purposes. One consideration here is whether the clients want to continue with all 3 plans or move to a common plan. Thank you, Mike and Tom, this is very helpful.

I'm an attorney representing the plan sponsors who are concerned about whether the controlled group status has a negative impact on the plans. I have all of the testing data for each plan (separately) and need to advise them about any issues. The employer of plan 3 was just added to the group in 2016, so I believe that plan is treated as passing coverage for 20176 and 2017. What other impact might the controlled group have on testing? When you mention above that "Plan 2 is safe if you pass the Average Benefits Test (which involves employer-wide data)" is that just for the employer of Plan 2 or do we combine all employees? Thank you!

Thank you. So for example in 2016: Plan 1: Safe Harbor with 4 HCE (all deferring with 10.81% ADP) and 252 NHCE (193 deferring with 4.09% ADP) Plan 2: Non-safe Harbor with 1 HCE (not deferring) and 15 NHCE (11 deferring with 4.07% ADP) Plan 3: Non-safe Harbor with 8 HCE (7 deferring with 4.91% ADP) and 101 NHCE (69 deferring with 4.22% ADP) Your help is greatly appreciated.

Tom: I think that's good news - If all 3 have passed the ADP tests on their own, then, I do not need to worry about ADP testing on a controlled group aggregate basis? What about the 2 who do not have safe harbor plans - do I have to aggregate those for ADP to confirm they would pass aggregated? Thanks!

Thanks, Mike. I can test coverage on the aggregated controlled group basis. What about ADP/ACP testing with one group member having a safe harbor plan?

I have 3 employers and 3 plans - all are part of a controlled group. One plan is a safe harbor plan since 2011. Each plan has always conducted coverage and ADP/ACP testing on its own - they never considered the controlled group aspect until now. Is there an issue on a controlled group basis if each plan has always passed on an individual basis? Thank you.