Nondiscrim Testing - Timing Question

[Guest HarveyC]

This is a 2-part question.

If a sponsor intends to increase benefits for an HCE just prior to his retirement on, say Aug 1, 2002, then what would the appropriate test date be for nondiscrimination testing to demonstrate that the increased benefit is nondiscriminatory? Would one say that the test year is 2002 and perform testing as of 12/31/2002, using the best data available (typically 1/1/2002 for a calendar year plan).

If a test was performed prior to 8/1/2002 demonstrating that the amended plan would pass using approximate data, MUST one have to test again using actual data received after 12/31/2002 or can we say the testing for 2002 was already completed (using approx data)? One reason this is important is that a profit sharing plan is permissively aggregated with the DB plan in question to help pass general testing. We will not know the actual PS contrib for 2002 until after 12/31/2002 and the amendment and retirement is to occur 8/1. The 2002 PS contrib is to be estimated based on 2001 amounts. What may one do in this case?