Who gets Gateway in a controlled group

[Guest Todd Lehmann]

I have a plan which has a controlled group of companies which participate in the plan(all tested as one plan not disaggregated) all particpants are eligible for 401(k)(date of hire) and match(year of service, semi annual) if they meet the requitements under the plan, however the profit sharing(year of service, semi annual) contribution is by company, with only one company contributing a profit sharing contribution to the eligible employees of that company only (integrated allocation), this plan cannot pass 401(a)4 on an allocation basis so we convert to a benefits basis and test. My question is does the 5% gateway apply and if so who needs to get the 5% gateway? Everyone eligible in the plan or everyone eligible to receive the profit sharing contribution which would be the eligible employees of the one employer making the contribution.

[Tom Poje]

according to the 'explanation of provisions' in the Federal Register in regards to minimum gateways, etc,

'...if one group receives an allocation rate of 10% and another receives an allocation rate of 3% [ok, in your case substitute 0%], AND

if the group of employees that receive the 10% alloaction rate satisfies section 410(B) (without regard to the average benefits percentage test) then the 10% rate and the 3% rate can be aggregated and treated as a single allocation rate for purposes of determining whether the plan has broadly allocation rates. [hence, no gateway needed]

In addition, the final regs provide that...differences in allocation rates resulting from any method of permitted disparity...are disregarded.

[Blinky the 3-eyed Fish]

Tom, in this case if the plans could satisfy the definition of broadly available allocation rates, wouldn't the plans be able to pass coverage on their own and not need to be aggregated for nondiscrimination?

So, I am betting the the plan with the 0% allocation cannot pass coverage on its own. Therefore, the gateway requirement must be met for the participants in both plans. However, it is permissible to disaggregate the plans for otherwise excludable employees and only need to satisfy the gateway requirement for the statutory employees.

Actually, as I am rereading the rules, in see what Tom is saying, so disregard my first paragraph. Though, if the rates do not end up being broadly available, and I must say it is a stringent criteria to satisfy, then see my second paragraph.