Permissive Disaggregation

[Guest Stacey L Miller]

Employer sponsors two (non-multiemployer) profit sharing plans. The plans are required to be aggregated and are top heavy. The employer also contributes to a number of different collectively bargained plans. I believe the multiemployer plans can be permissively aggregated with the two profit sharing plans for top heavy determination IF contributions or benefits under the multiemployer plans are comparable to the contributions or benefits provided under the other two plans (1.416-1, Question T-8). The employer says that benefits/contributions under the collectively bargained plans are MORE than under the profit sharing plan. Do you think I can permissively aggregate? Since the contributions cover different populations (pipe fitters, plumbers, etc), it would be a project to actually gather the balances to include in the top heavy test. Any suggestions?

I appreciate your input!

[Guest Brian4]

In the top heavy regulation Q&A T-7 discusses this. See also the top heavy audit guidelines, 4.72.5.2.5.2 & same start.3. Also, the nondiscrimination testing rules.

To demonstrate comparability, test minimum coverage (410(b)) and nondiscrimination( 401(a)(4)). But, the bargaining status does not give an automatic pass.

Nondiscrimination testing is complex. But, there are a couple of items that initially come to mind that may cause problems with the testing. The plan year synchronization rule. The requirement that lumps sums be available on a nondiscriminatory basis. Profit sharing plans generally pay lump sums, multiemployer pension plans generally do not. Of course, the specifics for this actual case is what matters. Also, ESOPs cannot be aggregated with other plans, and sometimes a profit sharing plan includes an ESOP feature or component.