Testing Issues In A DB/DCCombination

[Guest merlin]

I have a forest with a lot of trees, so I'd appreciate someone looking over my shoulder while I think this one through. I have a group of emergency room physicians that presently sponsors a mp/ps combination. There group consist of 5 owner- and 7 non-owner physicians. All are HCEs. There is one office manager, who is a NHCE. The OPs want to establish a DB plan with different levels of benefits to accomodate different doctors' contribution requirements. The NOPs will be excluded from the new db plan but will continue to participate in the mp/ps combo. The testing issues as I see them are as follows:

1.The office mgr must be in the db plan in order to pass 401a26.

2.The dc and db plans must be aggregated in order to pass 410b, and therefore for 401a4 (unless some new NOPs come in as NHCEs due to insufficient prior year comp).

3. If I have to aggregate for a4 I have to create aggregate accrual/allocation rates, as per 1.401a4-9b2, even though no single participant will have a truly aggregate rate. If I test on benefits my db guys will have NAR/MVARs, and my dc guys will have equivalent accrual rates. If I test on contributions my db guys will have Normal and Most Valuable Allocation Rates, and my dc guys will have their regular allocation rates.

4.If I impute disparity I have to do it on the "aggregate " rate determined above, using db or dc rules as appropriate.

5.As long as there is no common payroll I don't have a 25% limit for 404a7.

Anyone with any other thoughts or comments? Have I missed anything?

[AndyH]

1. Why not a 412(i)? (only kidding!)

2. Get rid of the MP plan

3. Real high maintenance and ego tending.

4. Looks like you have all the technical stuff considered.

5. Maybe include a 401(k) provision?

[Blinky the 3-eyed Fish]

If you are including the only NHCE in the DB plan, why does it need to be aggregated with the DC plans to pass 410(B)?

[AndyH]

If you don't aggregate, you'll need to include the NHCE in both the DC and DB.

[Blinky the 3-eyed Fish]

Ah, while not specifically stated, I see the idea was to avoid 404(a)(7).

One other thought to make them aware of is that if one of the doctors leaves, because of his HCE status, his distribution may very well not be able to be made unless the plan is appropriately funded.

[Guest merlin]

Blinky,

Good point about the possible restriction. But benefits are accruing on participation, so the funding hopefully will keep pace with the liabilities.