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I have a 401(k) plan where the employer has many union employees covered by a collective bargaining agreement. The union employees are currently excluded from the 401(k) plan. The owner is covered by the CBA under a separate union agreement, along with only a few other employees. For a little background, about 75% of the company's workforce is made up of union employees. If the plan were to amend to allow employees from only the separate union agreement that includes the owner, would all union employees need to be included in the compliance testing, regardless if they are excluded from the plan? The concern is that including all union employees would more than likely result in failed coverage testing.

A 401(k) plan has 1000 hour and last day requirement to receive match - fails the 401(m) ratio % test for 2020. In regards to correcting Coverage, the plan document states: "The Employer Contribution will also be allocated to individual Participants in the order specified until the Plan satisfies the minimum coverage requirements. A Participant, and all similarly situated participants, will be included only if necessary to satisfy those requirements." It then goes on to say you start with participants that worked the most hours that were still employed on the last day of the year, then work your way down to terminated participants with the most hours... We need to bring in several NHCE that terminated prior to 12/31/2020 to pass the ratio % test for 401(m). We have two HCE that are not benefiting under 401(m) because they terminated employment before 12/31/2020 who worked more hours than any of the NHCE we are bringing into the match. Does the "only if necessary to satisfy those requirements" allow us to ignore those two HCE's? I sure hope so because we can't pass if we have to include those two HCE.

We recently took over the work for a controlled group of employers that have a separate 401(k) plan for each employer. Deferral and match only, no profit sharing. All the plans pass the ratio percent test for coverage except for two plans - so the average benefits percentage is applied to test these last two plans for coverage. One of these two plans is a safe harbor 401(k) plan. The employer has no other safe harbor plan, thus it cannot be permissively aggregated with any other plan for coverage testing, correct? The final plan happens to be their only 401(k) plan that uses current year testing for ADP/ACP, so I don't think it can be aggregated with the other plans either. The question is regarding the terms 'testing group' and "taken into account" from the 410(b) regulations. In 1.410(b)-5(b), the average benefit percentage for a plan is the ratio of the NHCEs actual benefit percentage in plans in the testing group over the HCEs actual benefit percentage in plans in the testing group. In 1.410(b)-5©, the actual benefit percentage is the average of the employee benefit percentages in the group with all nonexcludables of the employer taken into account, even if not benefiting under any plan taken into account. In 1.410(b)-5(d)(3), the testing group is defined in 1.410(b)-7(e)(1) which states that the testing group is the plan being tested (obviously) plus all other plans of the employer that could be permissively aggregated with the plan being tested. So, when reviewing the prior firm’s coverage testing, they ran the average benefits test for the safe harbor plan by showing zeros for all the hundreds of nonexcludables (those are the employees in the controlled group covered by other plans but not covered by the safe harbor plan), then averaging the results. The averaging takes into account all of those zeros. However, for the current year tested plan, they ran the average benefits test by including allocations for all employees in all plans, including the allocations made in the safe harbor plan, then they averaged those results. So, for the average benefits test for coverage, the "testing group" is only the plan being tested. So does that mean the average for that test include all the zeros for the nonexcludables covered by other plans because they are to be "taken into account"? Or, are all the average benefits provided under the other plans also calculated for purposes of determining the average benefits. It seems like the prior firm did this both ways. Why would the safe harbor plan and the sole current year testing plan be done differently for these tests? Man, that's a long question. Sorry about that.

I know this has been discussed a few times, but anyway: Suppose a profit sharing only plan, not top heavy, has the profit sharing allocations with each participant in their own rate class. Assume 6 NHCEs and 1 HCE - all eligible for the plan. Also assume the plan has a last day requirement in order to receive an allocation. 2 NHCEs quit - both worked over 1000 hours. The document does not show an election to apply any "automatic fix" provisions for a ratio percent coverage test failure. Running an average benefits percentage test for coverage essentially requires a classification that is reasonable and is established under objective business criteria. Would this plan be allowed to run the average benefits percentage test for coverage purposes? Or, must the plan resort to a 1.401(a)(4)-11(g) amendment to make the plan pass the ratio percent test for coverage? Would the answer be any different if the plan had no allocation condition (no last day requirement)?

Our parent company recently purchased another company. We're testing things to see how we'll pan out with the coverage test. Some of our plans now fail the ratio test (using the entire controlled group) so we're moving to the ABT. As part of the ABPT on a stand-alone basis (no permissive aggregation yet), we need help with determining the denominator for each plan. Plan A NHCE avg benefit rate: 9% HCE avg benefit rate: 10% (1000 NHCEs and 200 HCEs) Plan B NHCE avg benefit rate: 4% HCE avg benefit rate: 4.5% (300 NHCEs and 50 HCEs) Aggregate NHCE avg benefit rate: 7.85% HCE avg benefit rate: 7.25% Are the results for Plan B 88.9% (ie 4/4.5) or as 55.2% (4/7.25)? Is the NHCE Concentration 85.7% (300/350) or 19% (300/1550)? Thanks.

Our parent company recently purchased another company. We're testing things to see how we'll pan out with the coverage test. Some of our plans now fail the ratio test (using the entire controlled group) so we're moving to the ABT. As part of the ABPT on a stand-alone basis (no permissive aggregation yet), we need help with determining the denominator for each plan. Plan A NHCE avg benefit rate: 9% HCE avg benefit rate: 10% (1000 NHCEs and 200 HCEs) Plan B NHCE avg benefit rate: 4% HCE avg benefit rate: 4.5% (300 NHCEs and 50 HCEs) Aggregate NHCE avg benefit rate: 7.85% HCE avg benefit rate: 7.25% Do the results for Plan B come out as 88.9% (ie 4/4.5) or as 55.2% (4/7.25)? Thanks.