401(k) Plan / average benefits test

[Guest hyper]

Employer in a controlled group sponsors a 401(k) plan. The (k) plan is the only plan in the controlled group and the employer is the only participating er. The only contributions being made to the plan for the testing year are (k) before tax deferrals.

The plan fails the ratio test under 410(b). So we move on to the nondiscrim. classification test / average benefit test. The plan satisfies the nondiscrim. classification safe harbor but we are having trouble determining the average benefit percentage for each EE.

1.410(b)-5(d)(2) says only employer provided contributions are taken into account in determining the avg. ben. % and "employee contribution" are not taken into account. What is an "employee contribution" for purposes of this section ?

If employee contributions include (k) deferrals, it seems to me the plan satisfies the avg. benefits test because all ee's would have a 0 avg. benefit %, and 70% of 0 is 0. If "employee contributions" has the traditional definition of after-tax deferrals we have a problem.

Any help is appreciated and sorry for long post, but the facts always help.

[Blinky the 3-eyed Fish]

401(k) deferrals count in the avg. benefits test.

[Guest hyper]

That is what I suspected, thanks for the confirmation, Blinky