DB-DC aggregate testing & features

[JAY21]

If I aggregate a DB and DC plan for 410(b) & 401(a)(4) testing, what benefits, rights and features must be common to both plans ? I believe distribution options would need to be the same (e.g., lump sum, J&S) but would vesting schedules have to be the same ? any other categories I need to be concerned about ? Thanks for any thoughts.

[Guest Doug Goelz]

I do not believe that vesting is a BRF that requires testing.

You might want to keep in mind that in aggregated DB/DC situations, the BRFs are broken down into two categories. The first could be thought of as core BRFs, and they include lump sum distribution optional forms, loans, ancillary benefits, and benefit commencement dates. The second category (non-core BRFs) would include all other BRFs.

For the non-core BRFs, see Reg 1.401(a)(4)-9(b)(3). You can use this as alternative approach to satisfying the normal current availability requirement. That is, this provides that the current availability of a non-core BRF can be restricted to just those participants in the DB plans in the aggregated group or just those DC plans in the group. Of couse, you would still have the effective availability issue to deal with.

[AndyH]

Doug, are you saying that a DB part of a DB/DC combo must offer a lump sum or there may be testing issues with the lump sum option in the DC plan? I never thought about that. It would be rare that you would not have a lump sum but I have heard one well known speaker suggest a no-DB lump sum approach as a way of avoiding the impact of 417(e) on the MVAR portion of the general test.

[Guest Doug Goelz]

I think it is quite clear that the lump sum option must satisfy the BRF requirements. I'd be curious to see the context of that speaker's comments.

[AndyH]

Well, in fairness it was in the context of just a DB and testing issues and it was verbal although it may also be in print.

He was just saying that if plan actuarial equivalence assumptions are standard under 401(a)(4) and there is no lump sum then the MVAR equals the NAR, so I'm actually the one taking the leap to the combo situation.