controlled group with different matching formulas and investment optio

[Guest ehayes]

i have a controlled group of corporations that have seperate 401k

plans that have different matching formulas and investment options. is this set up permitted and if so what are the testing implications?

[Tom Poje]

There are a number of testing implications.

If each plan can pass coverage separately, then you run separate ADP tests. or, if necessary, you can combine plans in any way, shape or form, as long as you are consistent - whatever you combine for coverage, you combine for ADP testing.

But remember, if you test each plan separately, all other employees (since they are treated as being employed by one employer) who meet the eligibility requirements of the plan being looked at are includable and not benefiting - since they received nothing under that plan.

Watch out for eligibility! you may suddenly cause some ees who are ineligible to become includable and not benefiting - though you can usually use 'otherwise excludable' option and avoid this trap.

you will need to test b/r/f (benefits/rights/features.) as well.

for example, suppose you have 2 plans - one matches 100% up to 3% and the other matches 50% up to 6%. The plan may pass the ACP test, but now you have 2 groups of employees with different rates of match.