Combined Testing for 410(b) and ADP/ACP

[Guest Chaffee]

Company A sponsors Plan A. Company A owns 70% each of Company B & Company C (which sponsor Plan B & C, respectively). Remaining 30% owned by executives of Company A.

Is there any basis to perform 410(b) testing on a consolidated basis? I believe the threshhold is 80% for consolidated testing.

Are the rules any different for ADP/ACP Testing? Refunds are required for Plan B & C when run individually, but not if all three plans run together (due to high NHCE participation in Plan A).

I'm not sure Plans can (or must) be combined, but wanted to make sure I wasn't missing something (or any ideas where to look next).

[jquazza]

Chaffee,

Nobody wants to reply, that's because you don't give enough info (who owns company A? How many execs own what of B&C? Do they own Co. A? What kind of business are these? Do B & C provide services to A? etc...)

You really want to look at whether the companies are part of a controlled group or affiliated service group. refer to IRC sections 414(b), 414© and 1563 for CG, 414(m) for ASG. There are lots of posts on the subject. If you are not familiar with the rules, it's best to let the client's counsel make the determination. Actually, even if you are familiar with the rules, it's best to let the client tell you as this determination can be construed as practice of law.

If they are CG or ASG, you have to aggregate the plans for 410(b). If each plan passes 410(b) on its own, you can, disaggregate for ADP/ACP, otherwise, you have to test them together. If they are not a CG/ASG, you cannot combine the plans for 410(b) and ADP/ACP testing.

And by the way, because A owns 70% of B & C, you have at least a CG for 415 purposes.