Money Purchase Plan impact on the Cross-test

[Fred Payne]

The Client had a Money Purchase plan for part of the year and had a funding obligation as a result. (And for those who will ask, Client's attorey failed to terminate the MP plan prior to start of Plan Year. There was no last day employment provision in the MP Plan.)

For the full year, Client has a cross-tested PS plan. Client fails the Ratio Percentage Test given an X% PS allocation.

When I perform the Average Benefits Test to see if the X% PS Allocation will pass, am I correct to include the MP allocation in this test?

Thanks.

[jquazza]

Sure, you can include both sources on both the a(4) and the ABT.

[Fred Payne]

My question has been answered about including the MP contribution when conducting the ABT, but I want to understand the response correctly since it says I can use both sources in both tests.

When I am calculating the EBAR that will be a factor in the Ratio Percentage Test, can I include as an Employer calculation the MP contribution?

If I can include the MP contribution, can the MP contribution be a "credit" against the Minimum Gateway? The extreme example would be a MP contribution of 5% that might preclude any additional PS contribution to the NHCs while the HCEs alone receive 100% of the PS contribution.

Thanks.

[AndyH]

Fred, you include the MP in the EBAR only if you are permissively aggregating the two plans for both minimum coverage and nondiscrimination. This is a two way street-both plans are aggregating the other.

You have certain requirements such as that the plans have the same year end (is this a problem for you?) and benefits, rights, and features would be subject to testing (or at least a look see).

If you do that, then, yes, you combine for the EBAR and the MP would be a credit against the gateway.

Your alternative is to NOT permissively aggregate. In that case, both would be in the ABPT but not the NCT ("EBAR part") of the a(4) test, and the MP contributions would be ignored for purposes of the gateway.