Aggregation of Plans

[Guest MichaelO]

We have a potential new client that currently has 2 401(k) Profit Sharing Plans. One is for Associate Attorneys only and the other Plan is for the Partners and Staff. The Associates Plan only has Elective Deferrals and the Partner's Plan has Deferrals, Safe Harbor Non-Elective and Profit Sharing. The Partners Plan is top heavy but they have not aggregated the Plans for testing or the minimums. My question is: They want to add cross testing to the Partners Plan. How does that affect aggregation/401(a)(4) testing?

[AndyH]

You would/could still test the partners plan as stand-alone for 401(a)(4) purposes, but all the non-partners who have met the statutory age and service requirements would be 0%s, so unless some of them are HCEs then it will be difficult to pass 401(a)(4).

You will aggregate both plans by necessity in the Average Benefits Percentage Test if any rate group does not have a ratio/percentage of 70%. But that may help, not hurt. The tough part will be getting each rate group to equal or exceed the mid-point under the Nondiscriminatory Classification Test portion of the 401(a)(4) test.

[Guest MichaelO]

To process my (a)(4) test would I include the Associates in the Partner's Plan as a separate Group receiving 0%? Also, would I input their Elective Deferrals for the ABP Test?

[AndyH]

yes to both

[Guest MichaelO]

Thanks for the info