Coverage testing

[Guest Lex]

A Plan provides a match to all participants who defer during the year. The Plan also has an additional match given to those that defer and are actively employed as of the end of the plan year.

How is the coverage for the 401(m) portion of the plan calculated?

Do you combine the matches and consider 100% coverage, evene though some participants did not recieve the additional match?

Or, would each match shown to pass coverage separately? Which we would result in do 401(m) coverage tests- one at 100% and the other at something less.

Thoughts?

[MWeddell]

All employees who defer are included in the coverage test for the 401(m) portion of the plan without regard to whether they were still employed on the last day of the plan year. (I'll ignore what happens if you're doing snapshot testing.)

One 401(m) test is run on all matching contributions (and any employee after-tax contributions.)

You need to run a benefits, rights, or features test from Treas. Reg. 1.401(a)(4)-4 because those employees who stayed until the last day of the plan year have a higher match rate available to them than others.