Excluding HC's in the general test

[Guest dietpepsi]

I posted this on the cross-testing board but it applies to DB plans only. I would like to know if any one is using this in real life situations.

1.401(a)(4)-3©(3).

This is what it says.

(3) Certain violations disregarded. A plan is deemed to satisfy paragraph ©(1) of this section if the plan would satisfy that paragraph by treating as not benefiting no more than five percent of the HCEs in the plan, and the Commissioner determines that, on the basis of all of the relevant facts and circumstances, the plan does not discriminate with respect to the amount of employer-provided benefits. For this purpose, five percent of the number of HCEs may be determined by rounding to the nearest whole number (e.g., 1.4 rounds to 1 and 1.5 rounds to 2). Among the relevant factors that the Commissioner may consider in making this determination are--

(i) The extent to which the plan has failed the test in paragraph ©(1) of this section;

(ii) The extent to which the failure is for reasons other than the design of the plan;

(iii) Whether the HCEs causing the failure are five-percent owners or are among the highest paid nonexcludable employees;

(iv) Whether the failure is attributable to an event that is not expected to recur (e.g., a plant closing); and

(v) The extent to which the failure is attributable to benefits accrued under a prior benefit structure or to benefits accrued when a participant was not a HCE.

Anybody ever used this in testing?

Thanks

[Guest merlin]

I think the fact that you have to get a determination letter ("...and the Commissioner determines...") as part of the process puts this option pretty much at the bottom of the list of testing options.